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Wisconsin Retirement System (WRS)
Annuitants Hired by Employers
Participating in the WRS
The Department of Employee Trust Funds (ETF) administers the WRS. It is statutorily responsible for ensuring that the WRS complies with federal law, and it may choose to investigate allegations that good-faith terminations from employment did not occur.
In response to questions about the extent to which WRS-participating employers have hired WRS annuitants, we:
Annuitants Hired by State Agencies
Individuals receiving WRS annuities and working in positions eligible to participate in the WRS are commonly referred to as “rehired annuitants.” Because payroll data we obtained do not indicate whether annuitants worked in WRS-eligible positions, not all of the individuals we identified are rehired annuitants. However, to provide the most comprehensive information, we included in our analysis all annuitants we identified as working for state agencies.
From January 2007 through
March 2012, the University of
Wisconsin (UW) System and state
agencies on Central Payroll hired
Annuitants working in WRS-eligible positions may choose to suspend their annuities and participate in the WRS as if they had never retired. Only 8 annuitants hired by UW System and 18 hired by state agencies on Central Payroll chose to do so.
We found that
We also found that
Annuitants Hired by Local Agencies
School districts reported that the
expected duration of employment
Local governments reported
that the expected duration of
Contracting with Annuitants
We could not determine the extent
to which state agencies contracted
with firms that employed annuitants
or the extent to which UW System
contracted directly with annuitants.
However, 28 state agencies directly
ETF does not have access to payroll systems that would allow it to systematically monitor all employers and employees. Therefore, it initiates investigations only when it believes that pension laws may have been violated. If an investigation determines that a good-faith termination of employment did not occur, ETF can require an individual to repay all annuity amounts that were received.
ETF does not have written policies
or procedures for conducting investigations.
Instead, it handles each
investigation in the manner it deems
appropriate. From August 2009
It can be challenging for ETF to determine that a good-faith termination did not occur. State law prohibits individuals who have not yet terminated employment from agreeing to work in a WRS-eligible position at a future date, but such agreements must be enforceable in order for ETF to determine that good-faith terminations did not occur. For example, individuals may indicate in their resignation letters that they desire to return to work, and their employers may subsequently hire them after the 30-day separation period. In these situations involving unenforceable agreements, ETF determines there is insufficient information to conclude that good-faith terminations did not occur.
State law does not prohibit an individual who has not yet terminated employment from agreeing to work for a different WRS-participating employer in a position ineligible for WRS benefits. This employment can begin during the separation period. At any point after the day an individual terminates employment, he or she can agree to return to work in a WRS-eligible position with any WRS-participating employer, as long as such employment does not begin during the separation period.
Most of the annuitants we identified who returned to work for state agencies worked part-time and for less than one year. Most were paid either the same or a lower hourly wage than they had been paid at retirement. Employers indicated that annuitants possess expertise that may be difficult to obtain from other employees. For these reasons, the Legislature could choose to make no modifications to statutes that govern how annuitants are able to return to work for WRS participating employers.
However, we also identified a small number of annuitants who worked for several years after retirement, worked more hours per week than they had worked before retirement, or were paid a higher hourly wage than they had been paid at retirement. This raises questions about the intent of these annuitants to truly retire. We provide several options the Legislature could consider if it chooses to modify statutes governing how annuitants are able to return to work.
If the Legislature is concerned that employers sometimes deliberately do not fill positions when employees terminate employment because they know they will hire annuitants shortly after the separation period ends, it could lengthen the separation period to 60, 90, or 120 days or more.
If the Legislature is concerned about maintaining the integrity of the separation period, it could prohibit individuals who have not completed their separation periods from working in positions that are ineligible for WRS participation, contracting with WRS-participating employers, and signing employment agreements that involve returning to work in WRS-eligible positions after the separation periods end.
If the Legislature is concerned about the potential for annuitants to work for several years, it could limit the length of time annuitants are allowed to work for WRS-participating employers.
If the Legislature is concerned about determining the fiscal effects on the WRS of hiring annuitants or modifying statutes governing how annuitants may return to work, it could consider obtaining an actuarial opinion.
We include a recommendation for ETF to: