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Return to Work of a State Universities Retirement System (SURS) Annuitant

Date: November 25, 2013


I. PURPOSE

In accordance with Public Act 97-0968, Public Act 98-0596, the Illinois Pension Code, and Board of Trustees Regulations, this policy outlines the conditions of employment, hiring procedures, and earning restrictions for State Universities Retirement System (SURS) annuitants. The following university procedure is necessary to fulfill compliance requirements and the avoidance of significant financial implications for the university and retirees seeking re-employment. This policy is subject to modification pursuant to statute, Administrative Rules, and procedures established by the SURS.

II. POLICY

Board Regulations II.A.9 and II.A.6 Rehiring of Retirees:

The employment of personnel retired under the State Universities Retirement System (SURS) shall be in accordance with university procedures authorized by the President.  Compensation for employment of a person receiving a retirement annuity under the SURS shall not exceed limitations set forth in the relevant provision of the Pension Code, including Article 15 and/or other applicable statutes, nor any limitations set forth in Public Act 97-0968 that would create employer obligations pursuant to rules and definitions pertaining to an Affected Annuitant.

Retirement (annuity) or separation refund (lump sum distribution) under retirement plan options available under the SURS constitutes resignation of employment from Northern Illinois University, subject to any subsequent re-employment authorized pursuant to this Regulation.

Effective August 1, 2013, Public Act 97-0968 establishes a 40% of Highest Annual Earnings (under the SURS) limitation on total compensation paid to retirees of the State Universities Retirement System (SURS), otherwise, the retiree will become designated under statute as an “affected annuitant.”  This limitation is in addition to and may be more restrictive compared to the annuitant’s personal earnings limitation.  SURS earnings limitations are summarized below:

Statutory SURS Annuitant Reemployment Earnings Restrictions

Three potential total earnings restrictions apply to SURS annuitants re-employed by one or more SURS employers:

Personal Earnings Limitations (40 ILCS 5/15-139b):

  • Retirement prior to age 60 – Monthly compensation is limited to the current monthly retirement annuity.
  • Retirement at age 60 or over – Annual compensation is limited to the difference between highest annual earnings prior to retirement and the annual retirement annuity.

Earnings Limitation Related to Classification as an “Affected Annuitant” (40 ILCS 5/15-139.5):

  • If an annuitant has been employed on or after August 1, 2013 and annual compensation is received in excess of 40% of the highest annual earnings prior to retirement, then the annuitant will become designated as an “affected annuitant.”

Human Resource Services (HRS) will centrally administer employment procedures for SURS annuitants.  All specifications concerning earnings limitations, annuities, highest annual earnings, and determination of any exceptions will be in accordance with information and procedures provided by the SURS.  The university is required to provide records to SURS relating to employment and compensation paid to any SURS annuitant.  Significant financial consequences may pertain to individuals exceeding their personal earnings limitations and to employers continuing to employ retirees who exceed the 40% earnings limitation thus becoming classified as “affected annuitants.”  It is important to note that, the 40% is an annual academic year limitation, which the statute has defined as September 1 – August 30 as of the statutorial change effective November 19. 2013.  Prior to the change the university defined this as August 16 – August 15.  Retirees who exceed the 40% annual earnings limitation will become classified as an “affected annuitant.”  Therefore, individuals who exceed the 40% limitation will generally not be eligible for future re-employment at NIU or other SURS employers.  

Documentation Requirements:

All current retirees, new hires, and rehires, regardless of employment category, will be required to complete the Declaration of Status under the State Universities Retirement System (SURS) form.  Modification to current appointments may be required.   On the declaration form, individuals will indicate whether or not they are a SURS annuitant.  If the individual is an annuitant, a copy of the SURS Award Letter documenting both the personal earnings limitation and the highest annual earnings will be required.  Compensation for SURS retirees who are re-employed will be limited to the lesser of the two earnings limits.  Participants are encouraged to provide updated statements of earnings limitations from the SURS.  Otherwise, the personal earnings limitation established at the time of retirement will be utilized.  In addition to providing this information, annuitants will also be required to certify any employment that has been obtained and disclose whether or not they have already been determined to be an affected annuitant.  The statute places responsibility on retirees to provide accurate information concerning earnings limitations provided by the SURS and employment status. Thus, the accuracy of information contained on the declaration form is very important, and misrepresentation of this information may result in discipline, revocation of the appointment, and possible financial and legal consequences (including, but not limited to, repayment of fees and penalties charged to the university). Specifically, falsification of information contained on the Declaration Form is considered a Class A misdemeanor under statute.    

Annuitants who obtain employment with another SURS employer after they have submitted their initial form will be required to notify the university of any such employment by submitting an updated Declaration form within 5 days of accepting employment.  The acceptance of additional employment at another SURS employer may result in termination of employment.  No offer of employment may be authorized by any university department or representative until Human Resource Services (HRS) has verified the prospective employee's status.  Departments/divisions that employ individuals in this category prior to the approval of HRS will be responsible for any fines subsequently imposed by the SURS associated with the hire.  Human Resource Services will continuously review the status of employees in this category, which may result in necessary appointment revisions.  Any necessary appointment revisions will be discussed and coordinated with the applicable personnel and department(s). 

In accordance with Public Act 97-0968, the university will certify the annuitant’s hiring information to SURS within 60 days.  This certification will include the dates of employment, projected earnings, fund source for the employment, and a summary  of the applicable contract.

Annuitant Employment Procedures:

Following receipt and confirmation of information contained on the Authorization and Declaration forms, HRS will verify earnings on a per-pay-period basis taking account of applicable earnings restrictions as outlined above.  Additionally, fund source specifications will be evaluated with respect to available statutory exceptions.  The determination and verification of maximum earnings an annuitant may receive will include the following considerations:

Fund Source:   The university is required to certify the funding source of a re-employed annuitant.  Therefore, if an employee is going to be paid on a grant (Fund 44) or foundation (Fund 90 and 91), it should be reflected in HRS at the time of hire.  Under Public Act 97-0968, an employee paid solely by a grant (Fund 44) or foundation (Fund 90 and 91) may be considered exempt from the Highest Annual Earnings limitation (40%) but not the personal earnings limitation.  Thus, the employee will continue to be limited to their respective earnings limitation.  No journaling from or to a grant can be done after the hire.  Until the Administrative Rules are established by the SURS, the university has established that the individual must be paid 100% from grant or foundation funds to be excluded from the 40% earnings limitation for monitoring purposes.  This must be reflected as base funding in Human Resource Services and not implemented as a journal voucher post hire.

Compensation Calculation for Exempt (Salaried) Employees:   SURS retirees appointed in an exempt (salaried) capacity (e.g., Faculty, Graduate Assistant, Civil Service, or SPS) will be temporary and limited in compensation to no more than 39% of their Highest Annual Earnings or 100% of their personal earnings limitation, whichever is less.  A maximum earnings limit will be determined by distributing the applicable earnings limitation over the number of pay periods authorized for appointment and as appropriate for the content, purpose, and duration of a given appointment.  For faculty or other personnel that the department wishes to employ on multiple appointments (e.g., 9 month contract, intersession, summer, other part-time appointments), it is recommended that a hiring plan be shared with HRS along with the initial appointment request so that this can be accounted for in the analysis.  Civil Service employees in this category are only those annuitants employed as of July 1, 2013; future hires will be in the capacity of temporary faculty, temporary SPS, Graduate Assistant, or Affiliate.

For example, for a 12-month appointment where the Highest Annual Earnings is $100,000, the calculation would be as follows:  $100,000*.39 = $39,000/24 = $1,625.00 per pay period or less.  This would result in $1,625 being the maximum per pay period that the individual would be able to receive.  However, if the existing personal earnings limitation was less than $39,000, then the individual would be limited instead to their personal earnings limitation. 

For appointments where the maximum earnings limitation is distributed for an appointment of less than 24 pay periods, it must be emphasized (as stated on the Declaration Form and university policies) that a successive appointment at NIU or subsequent employment by another SURS employer could cause the person to become an “affected annuitant” and therefore not be eligible for future employment at NIU. 

Compensation Calculation for Non-Exempt (Hourly) Employees:   SURS retirees being hired in an hourly capacity (e.g., civil service, extra help, or student) will be limited in compensation to no more than 39% of their Highest Annual Earnings or 100% of their personal earnings limitation, whichever is less.  A maximum earnings limit will be determined by distributing the applicable earnings limitation over the number of pay periods authorized for appointment and as appropriate for the content, purpose, and duration of a given appointment.  Civil Service employees in this category are only those annuitants employed as of July 1, 2013; future hires will be in the capacity of student or extra help. 

For example, for a 900-hour extra help appointment where the Highest Annual Earnings is $40,000, the calculation would be as follows:  $40,000*.39 = $15,600.  The employee may be limited to this earning limitation divided by 900 or $15,600/900 = $17.33 per hour or less.  Thereafter, the individual would not be eligible for a subsequent extra help appointment for the remainder of the academic year, unless sufficient earnings capacity remained.  Under no circumstances can the employee be paid less than the minimum wage.  Departments must not commit to or authorize overtime or differentials for non-exempt employees, as this may put annuitants over their earnings limitation and/or disqualify them from future employment with NIU or other SURS employers in the event that such compensation results in an “affected annuitant” designation.  In some situations, based on the individuals pay rate, the employee may not be able to work the full 900 hours.  For hourly employees with a monthly earnings limitation, the calculation will reflect the monthly earnings limitation divided by 162.5.

Other Provisions

  • Compensation for Benefits:  Annuitants who are currently in status positions where the university is obligated (by statute or regulation) for payouts of accrued benefits (e.g. vacation) should be aware that the payout of benefits could result in the individual exceeding their earnings limitation causing them to become an affected annuitant.  HRS will review such situations on a case-by-case basis.  Generally, retiree appointments will not be eligible for accrued benefit payouts.
  • Additional Compensation: Annuitants will not be eligible to receive additional pay.  Summer contracts for annuitants should be processed on a Personnel Action Form (PAF). 
  • FTE:  The FTE for annuitants hired in SPS, Faculty, and Graduate Assistantship positions should reflect the actual hours the employee is expected to work or the number of classes they are expected to teach.  For example, if a temporary SPS employee is expected to work 30 hours per week, the FTE should reflect 80%. Under no circumstances should an annuitant’s compensation exceed the employee’s applicable earnings limitation.  Adjustments in FTE and contract length may have an impact on applicable sick and vacation benefits. 
  • 9 over 12 Option:   Retirees will not be permitted to utilize the 9 over 12 option.
  • Academic Year:   Pursuant to Public Act 98-0596, the Academic Year for purposes of this policy shall be September 1 – August 30.
  • Independent Contractor:   Administrative rules require individuals claiming to be an independent contractor to file Form SS-8 (Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding) with the IRS to confirm the Independent Contractor status. Annuitants generally cannot be hired as an Independent Contractor.
  • Civil Service Appointments: Civil Service employees are required to adhere to the earnings limitations set forth by the State Universities Retirement System.  Individuals wanting to return to employment as civil service must follow the same testing and requirements as non-retirees.  
  • Regular SPS Appointments:  Existing retirees appointed to regular SPS positions will be evaluated on a case-by-case basis and options will be provided to personnel in terms of their appointment provisions in compliance with applicable earnings restrictions and university policies.  As of August 1, 2013, SURS retirees hired as SPS may only be appointed on a temporary basis with earnings limited to applicable limitations and this policy (subject to future SURS or State University Civil Service System {SUCSS} rules and procedures).
  • Illinois Retirement Systems Reciprocal Act:  The Reciprocal Act provides that retirement may be coordinated among one or more retirement systems where a participant may have vested benefits available.  Any SURS annuities payable under the Reciprocal Act will result in the SURS portion of the annuity being covered under the provisions of P.A. 97-0968 and P.A. 98-0596 and this policy.
  • Affected Annuitant:  Except in the event of emergency situations where an appointment is necessary to maintain ‘critical operations’ as defined under statute, NIU will not employ an affected annuitant due to the financial obligations associated with P.A. 97-0968.  Any such requests must be evaluated by HRS and will only be authorized following review and concurrence of the SURS.
  • Transition Rules:  All current retiree appointments will be analyzed by HRS based on information recently made available by the SURS and provided through the Declaration Form process.  Existing appointments are subject to modification as necessary to comply with this policy and applicable statutes.  Any such modifications will be coordinated with the individuals and departments involved.

Questions regarding this policy should be directed to Human Resource Services (HRS).

References:

80 IL Adm. Code 1600.203
Illinois Pension Code
Public Act 97-0968
Public Act 98-0596
Board of Trustees Regulations