Two of the most popular retirement dates are July 1 and January 1, and both of these dates begin a busy retirement season filled with questions from retirees and employers. Many of these questions revolve around returning to work post-retirement and the ASRS Working After Retirement online smart form, also known as the Return to Work (RTW) form. As we approach the next retirement season, we want to revisit some frequently asked questions from employers and address some of the scenarios that can cause confusion when hiring retirees.
What do I need to know before I hire a retiree?
After ascertaining that the person you are hiring is an ASRS retiree, you will need to know:
- •Did the member retire under early or normal retirement criteria?
- •Did the member terminate employment before retiring?
Why do you need to know this?
These answers determine whether limits will apply to the number of hours a retiree can work for you and whether or not the retiree can remain retired and continue to receive their benefit while working again for an ASRS employer.
How do we know if we can offer the retiree a membership-eligible position?
We strongly encourage retirees to use the RTW form as an evaluation tool before accepting an employment offer. The form will evaluate the retiree’s answers and determine whether the employment is in compliance with ASRS RTW rules. The retiree must submit this form within 30 days of the date their employment begins.
Once you, the employer, verifies the conditions of the employment on the RTW form, the form will indicate if you will need to remit contributions to ASRS at the regular retirement rate because the retiree has elected to suspend their pension and accept a membership-eligible position, or remit contributions at the Alternate Contribution Rate (ACR) for hiring a retiree who is eligible to remain retired.
Please note, the RTW form will not be available to a new retiree until their retirement benefit is finalized, which can take 45 to 90 days to complete. This limitation is a known issue and the expectation is that the RTW form will be submitted as soon as it is available on the retiree’s secure account.
What is the difference between hiring early & normal retirees vs. those who retired without terminating?
Normal Retiree with a Termination Date: If 365 days have passed since their termination date, the retiree can return to work for an ASRS employer and accept a membership-eligible position without having to suspend their retirement benefit. A membership-eligible position is a position wherein the employee is engaged to work at least 20 hours a week for at least 20 weeks in a fiscal year, also known as the 20/20 Membership Criteria.
If 365 days have not passed since their termination date, a normal retiree may still return to work for an ASRS employer, but they cannot accept a membership-eligible position. They will need to either keep their hours below the 20/20 Membership Criteria, or suspend their pension benefit to accept a membership-eligible position.
Normal Retiree with an End of Membership Date: Those who meet normal retirement criteria can retire without terminating employment by reducing their hours to below the 20/20 Membership Criteria, which ends their membership eligibility. Retirees who never terminated cannot accept a membership- eligible position without first terminating and waiting 365 days. They must keep their hours below the 20/20 Membership Criteria until they terminate from the position they retired from. Please note that even though the retiree reduced their hours below the 20/20 Membership Criteria, the ACR will be owed rather than regular retirement contributions because you are now employing a retiree.
Early Retirees: Members who retire before reaching normal retirement eligibility are early retirees. All early retirees must have a termination date to retire. For early retirees, even if 365 days have passed since termination, they cannot accept a position that meets the 20/20 Membership Criteria until they meet normal retirement eligibility.
Normal retirement eligibility criteria is based on membership date. You can find the different retirement eligibility criteria here: https://www.azasrs.gov/content/retirement-eligibility
What if I lease a retiree through a third party contractor?
Leasing retirees does not exempt an employer from reporting the ACR. If you lease an ASRS retiree through a third party contractor, the retiree does not need to complete the RTW form. Regardless of the number of hours a leased retiree may be contracted to work, ASRS employers must still remit ACR. When we receive ACR, the retiree may receive a reminder to submit a RTW form. If they work for a third party, they can disregard this reminder.
Are there exceptions where employers would not pay the Alternate Contribution Rate (ACR)?
If the employer provides proof that 1) the retired member is leased from a third party, 2) all employees in the entire class of positions to which the retired member’s position belongs have been leased from a third party, AND 3) the employer does not have any direct employees performing the same, or substantially similar, functions or duties as the retired member, then the employer is not required to pay the ACR for that retiree. Requests for this exemption must be submitted via Employer Secure Messaging and approved by ASRS before the exemption is applied.
As an example, a school who leases an ASRS-retiree substitute teacher through a leasing company would pay ACR even if all substitute teachers were leased from a third party, as long as the school has at least one direct employee (not leased from a third party) who is a teacher.
However, if the leased retiree is working in a position that is currently filled by another employee who is actively contributing to the ASRS, then the ACR is not due. This means if an active member employee is on paid leave (and therefore 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 ACR for the retired member.
You can find more information on the ACR here: https://www.azasrs.gov/content/alternate-contribution-rate
What if the retiree elects to enroll in another retirement plan?
There are scenarios where an ASRS retiree may not need to complete the RTW form, and where the employer may not need to pay ACR. The retiree can remain retired if they begin or return to employment in a position that satisfies all of the following:
- Results in a true change in position, job duties and job title from the position occupied by the member before ASRS retirement.
- Requires participation in another state retirement system, plan, or program and the retired member chooses to make contributions or waive participation – OR – Allows a member to elect to participate in another state retirement system, plan, or program and the member makes such an election. Another state retirement system, plan, or program includes the Public Safety Personnel Retirement System, Corrections Officer Retirement Plan, the Elected Officials Retirement Plan, or an optional retirement plan (ORP) with a state university or community college.
- Does not require membership in the ASRS.
For example, if an ASRS retiree who retired from a school district is hired by a state university or a state community college, and the retiree elects to enroll in their ORP, they do not have to complete a RTW form, nor does the employer have to pay the ACR on the retiree.
Another example would be if an ASRS retiree member retires from the Department of Economic Security and later becomes employed by the Department of Corrections. If this retiree has the option and elects to enroll in the Corrections Officer Retirement Plan, they do not have to complete a Working After Retirement form, nor does DoC have to pay the ACR on the retiree.
Even if the retiree is eligible to Return to Work and remain retired, could they elect to suspend their benefit and contribute again?
There is no maximum age for an ASRS retiree to return to work for an ASRS employer, but there is a date after which a retiree cannot suspend their benefit and return to membership. Internal Revenue Code 401(a)(9) sets a Required Minimum Distribution (RMD) age after which a member who is no longer contributing to a retirement plan must either retire or withdraw from their retirement accounts. The RMD rule applies to all employer-sponsored retirement plans including the ASRS. The RMD age is currently 73. The IRS also sets a Required Beginning Date (RBD) which is the specific date by which a member must take their RMD. The RBD is April 1st of the year after a member reaches the RMD age.
If a member retires after reaching RMD age, then returns to work after the RBD has passed, they do not have the option to suspend their benefit and return to ASRS membership.
For example, consider a teacher who turned 73 in June 2024, terminated on June 30, 2024, and retired on July 1, 2024. An ASRS employer offers this retiree a membership-eligible position on November 1, 2024. The retiree decides to accept, and because they’re still within their 365 days since termination, they must suspend their benefit and contribute again. This is allowable because their RBD (April 1, 2025) has not yet passed. In this situation, the employer will need to remit regular retirement contributions.
In the same scenario except with the position being offered on July 1, 2025, the retiree can accept the position and remain retired because 365 days have passed since their termination. However, even if they wanted to, they will not be able to suspend their benefit and start contributing again because their RBD has passed. They can still accept the position but they cannot suspend their benefit. The ACR would be required from the employer.
By Genevive McBride, Employer Relations
Published 11/26/2024
