Hiring IMRF Retirees - Issues

for IMRF Employers
Construction worker

Avoid Violating Return to Work Rules

All IMRF employers must comply with return to work rules. Audits of employers frequently uncover return to work violations. Violating return to work 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 a return to work, including specific details about his or her work history and pension calculation. To prevent violations:

Change in Rules for Non-participating Positions

Recent legislation requires you to re-enroll retirees in IMRF if the actual hours a retiree works for you in a 12-month period exceed your employer's hourly standard (either 599 or 999)—even if the position was not "normally expected" to exceed the hourly standard.

Rules for Returning to Work in a Non-participating Position
If a retiree returns to work in a position that is not expected to qualify for IMRF participation, you must:
  • Contact IMRF to report the return to work   
  • Keep track of the hours the retiree works in the 12 months following his or her most recent start date
 If within these 12 months the retiree:
Then
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 the retiree reaches either 600 or 1000 hours. The retiree cannot return to work for any IMRF employer until the one-year anniversary date of his or her employment. 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 again, until he or she reaches your employer's hourly standard in the next 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. 
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 return to work for you without having his or her pension stopped is the one-year anniversary date of the retiree's employment.

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.