Hiring an IMRF Retiree

Always contact IMRF if you hire an IMRF retiree

Many factors are involved in determining if a retiree’s pension will be affected by a return to work. If you are aware that you are hiring an IMRF retiree, you should contact IMRF regardless of the hourly standard of the position the retiree will hold. In addition, the retiree must also contact IMRF before he or she accepts the position to discuss how his or her pension may be affected. Failure to inform IMRF of a return to work could result in significant financial repercussions for a retiree or your employer.

(This also applies to newly elected/appointed officials, if the office is one where they previously earned any IMRF pension credit, or if they elect to participate in IMRF while in a brand-new office.)

For more informtaion, you can also read the "Returning to Work After Retirement" brochure for members.

You can also print a flyer to give to an IMRF retiree who is considering a return to work at your employer.

Employer Audits check for retirees who have returned to work

IMRF’s ongoing employer audit program is finding an increasing number of situations where IMRF retirees are working in positions under which they should have been re-enrolled in IMRF and/or had pensions suspended. Noncompliance is a serious matter that can affect a member’s future and create additional financial liabilities for employers. Participation in IMRF is a legal right. Compliance is not only the right thing to do, it costs employers less in the long run.

Hourly standards and returning to work

Your employer’s hourly standard can have an impact on whether a retiree’s pension will be affected by returning to work for an IMRF employer.

1,000-hour employers
If the retired member you are hiring ever participated in IMRF under the 600-hour standard, a special rule applies:

• If the position requires more than 600 but less than 1,000 hours, the retiree will not participate in IMRF and the pension will be suspended.
  

One exception to the rule: If an employer changed its hourly standard from 600 to 1,000, any member who participated under that employer before it changed its hourly standard remains grandfathered under 600 hours for that employer only.

Therefore, if your employer changed its hourly standard and you are hiring an IMRF retiree, you must determine if the retiree previously participated with you when you had a 600-hour standard. If he or she did and the retiree's position will require 600 hours or more, the retiree will participate in IMRF even though you now have a 1,000-hour standard.

In any case, if a retiree returns to work in any position that qualifies for IMRF participation under that employer’s hourly standard, his or her pension will be suspended and he or she is required to again participate in IMRF. Remember: a member who retired under ERI can never return to work for an IMRF employer, even in a non-participating position.

What about Independent Contractors?

Some employers think that hiring an IMRF retiree as an independent contractor will avoid any potential consequences to the retiree’s pension. This is not always the case. A retiree’s pension could be affected by working as an independent contractor if:

• The retiree retired under the Early Retirement Incentive (ERI). If an ERI retiree returns to work for any IMRF employer in any position, even as an independent contractor, his or her pension will be affected. Not only will the pension be suspended, but severe financial penalties apply.
  
• The retiree is incorrectly classified as an independent contractor. In this case, even if the retiree did not retire under an ERI, his or her pension could be affected. In addition, if you have incorrectly classified an employee (including non-retirees) as an independent contractor, you are subject to assessment for retroactive IMRF contributions, and you may be held liable for employment taxes for that employee.
  

The Internal Revenue Service has identified specific characteristics of an Independent Contractor. IMRF recommends before you accept employment with an IMRF employer as an Independent Contractor, you and/or your potential employer file IRS Form SS-8 with the IRS. The IRS will then make an official determination regarding the position. Contact the IRS at www.irs.gov or 1-800-829-1040 for more information about IRS Form SS-8.

The Internal Revenue Code has specific requirements for what qualifies as an IndependentContractor classification. For detailed information, see section 3.60A of your Manual for Authorized Agents, or visit Topic 762 on the IRS website.