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:
- Financial: After adjusting wages for each month the retiree should have been enrolled, your employer must pay both employer and member contributions for those months. It is your employer’s responsibility to then recover the member’s contributions. Your employer may also have to pay up to half of the total annuity payments the member received during the return-to-work period.
- Lost Efficiency: When a return-to-work violation is uncovered, your employer must go back and adjust wages for every month that should have been reported. Often the violation covers a span of several years. The time required to correct these errors can be significant.
- Damaged Credibility: Causes of return-to-work violations can range from a lack of understanding about the laws governing IMRF to deliberate attempts to overlook the rules. In all cases, return-to-work errors damage the reputation of your employer, IMRF and public pensions in general.
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:
- Always call IMRF before hiring an IMRF retiree, regardless of the hourly standard of the position the retiree will hold
- Instruct the retiree to contact IMRF to discuss how his or her pension may be affected
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:
| 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 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:
|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.
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.