Hiring IMRF Retirees - Cautions

for IMRF Employers
Construction worker

Avoid Violating Working After Retirement Rules

All IMRF employers must comply with rules regarding when a retiree can work for a public sector employer. Audits of employers frequently uncover retiree work violations. Violating these rules can not only harm a retiree's financial security in retirement, but can also cause significant complications for your employer, including:

What should you do?

Many different factors determine whether a retiree's pension will be affected by working after retirement, including specific details about his or her work history and pension calculation. To prevent violations:

Separation of Service Rules

To comply with the Pension Code and IRS regulations, the IMRF Board has adopted new separation of service rules.

New Rules Effective January 1, 2021

These rules apply to members who terminate participation on or after January 1, 2021:

Consequences of Not Separating from Service

IMRF will immediately suspend the pension of any IMRF retiree who performs any type or amount of work for any IMRF employer within 60 days of their pension start date, or who prearranges returning to employment with an IMRF employer after retirement. Retirees who violate this policy must pay back all pension payments that they have received, because they did not truly separate from service.

For More Information

For detailed information about Separation of Service Rules, read General Memo 686 or read the full resolution here.

Overview of Return to Work Rules

Return to work rules are complex, and not all rules are listed on this page. Some of the main points include:

  1. If a retiree returns to work for an IMRF employer, they must keep track of the hours they work. If they end up working enough hours to reach the employer's hourly standard, you must immediately enroll them in IMRF and their pension must stop, or they must immediately stop working. See the chart below for additional details.
  2. If a member retired under the IMRF Early Retirement Incentive, he or she can never work for any IMRF employer, even in a position that does not participate in IMRF or as an independent contractor. (An exception may exist for certain elected positions, call IMRF for details.)
  3. Tier 2 retirees have additional return to work restrictions and should call IMRF before returning to work for any public sector employer in Illinois.  

Rules for Returning to Work
If a retiree returns to work for an IMRF employer, they must:
  • Contact IMRF to report the return to work
  • Keep track of the hours they work in the 12 months following their first date of reemployment, and in every 12-month period thereafter.
 If within these 12 months the retiree:
Works below your employer's hourly standard (either 600 or 1,000 hours) The retiree's pension payments can continue.
Is approaching your employer's hourly standard (either 600 or 1,000 hours) but the retiree wants his or her pension to continue The retiree must:
  • Stop working for you before he or she reaches either 600 or 1,000 hours. (The retiree can work up to 599 or 999 hours.)
  • The retiree cannot work for you until the one-year anniversary of his or her employment start date. On that date,
    • The retiree’s return-to-work period is reset for the next 12 months.
    • The retiree can return to work for you until he or she again reaches your employer’s hourly standard in the following 12 months.
    Reaches or exceeds your employer's hourly standard (either 600 or 1,000 hours)
  • You must re-enroll the retiree in IMRF.
  • The retiree's pension payments must be put on hold until he or she stops working for you.
  • When the retiree retires again, their pension will be recalculated using the additional service credit.
  • Unexpectedly reaches your employer's hourly standard (for example the retiree filled in for another employee and went over without realizing it) but the retiree wants his or her pension to continue The retiree must
  • Immediately stop working for you in the same month he or she reached the hourly standard.
  • The earliest date the retiree could work for you without having his or her pension stopped is the one-year anniversary date of the retiree's employment start date.
  • Hourly Standards and Returning to Work

    If you are hiring an IMRF retiree, you should base the chart above on your employer's hourly standard, with one exception: if your employer changed its hourly standard from 600 to 1,000 hours, any member who participated under your employer before it changed its hourly standard remains grandfathered under 600 hours for your employer.

    If your employer changed its hourly standard and you are hiring an IMRF retiree who participated with your employer under a 600-hour standard, he or she will be subject to the 600-hour standard even though your employer is now under the 1,000-hour standard.

    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 (IRS) has specific requirements for what qualifies as an independent contractor classification and has the authority to make official determinations regarding the classification of an employee. If your employer and IMRF cannot resolve a dispute over a job classification, your employer will be required to seek an official determination regarding the position from the IRS.

    For detailed information, see Section 3.60A of the Manual for Authorized Agents, or visit Topic 762 on the IRS website.