'Return to Work' Employees and the Alternate Contribution Rate

When an ASRS retiree returns to work for an ASRS employer and meets active membership criteria, then active contributions must begin and the member’s pension is suspended. The member will not receive a pension benefit until they either terminate employment or reduce their hours and re-retires. However, there is an exception to this rule. Under very specific conditions, an ASRS retiree can qualify to remain retired while working for an ASRS employer. It is the responsibility of both the retiree and employer to ensure compliance.

A.R.S. §38-766 allows all retirees who have terminated employment to return to work less than 20/20 after retirement without suspending their pension. However, a retiree’s pension will be suspended if any of the following conditions are met:

• Member did not reduce hours below 20/20

• Member worked some 20-or-more-hour-weeks prior to retirement and then, after retirement but in the same fiscal year works 20-or-more-hour weeks so that the total weeks of at least 20 hours worked before and after retirement equals or exceeds 20

• Member meets or exceeds 20/20 in any fiscal year after retirement without having attained normal retirement and having been terminated from employment for at least 365 days

A.R.S §38-766.01 allows a retiree to return to work full time without suspending their pension if they meet all of the following conditions:

• Member must have either retired at normal retirement age or at least reached normal retirement age prior to returning to work

• Terminated employment prior to retirement

• Member must wait 365 days from date of termination to return to work

The ASRS retiree must complete the Return to Work smart form within 30 days of their hire date. This form is located online by logging into their MyASRS account. This form is not required if the ASRS retiree is not a direct employee of the ASRS employer.

A.R.S. §38-766.02 requires all ASRS employers to pay contributions at an alternate rate (ACR) on behalf of all ASRS retired members who return to work in any capacity with that ASRS employer and do not suspend their pension. The ASRS employer pays the ACR and the cost cannot be passed onto the retired member.

The ACR must be paid for all employees who are retired from the ASRS and who are in a position ordinarily filled by an employee of the ASRS employer or in a position that is similar in duties and responsibilities to that of a position ordinarily filled by an employee of the employer. Generally, this includes all ASRS retirees who maintain a retired status with the ASRS and who perform work in any capacity, regardless of:

• Whether they are considered a direct-hire, contractor, or leased employee

• The number of hours or weeks they work

• Their participation in another retirement system

This statute was amended on August 27, 2019, to provide that an employer is not required to pay the ACR if the retired member is working in a position that is currently filled by another employee who is actively contributing to the ASRS. This means if an active member employee is on paid leave (actively contributing to the ASRS), and the employer hires a retired member to fill in during the active member’s paid leave, then the employer is not required to pay the ACR.

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