1. 1 Annuitant Return to Service and Emergency Employment Guidelines Training and Informational Seminar By Troy Peechatka

2. 2 Introduction Emergency Employment and Personnel Shortage Extracurricular Employment College Employment Guidelines for Independent Contractor Employment

3. General Rule  A PSERS retiree is not permitted to return to work in a Pennsylvania public school without a suspension of their monthly benefits  The exceptions to this rule are:  Emergency Employment/Personnel Shortage (Emergency)  Extracurricular Employment, and  (if specific conditions are met) Employment as an Independent Contractor 3

4. WHY IS PSERS INVOLVED? PSERS has a legal obligation to properly administer the terms of the Retirement Code There are specific tax qualification rules that PSERS must follow. The I.R.S. does not allow an individual to work for the same company from which they receive an annuity, and PSERS must ensure any post-retirement employment is in compliance with the Retirement Code. 4

5. 5 EMERGENCY EMPLOYMENT An emergency is defined by the Retirement Code as creating an increase in the workload such that there is serious impairment of service to the public, or in the event of a shortage of appropriate staff. The initial determination of an emergency situation is in the judgment of the employer

6. 6 EMERGENCY EMPLOYMENT A retiree may return to service for the number of days the emergency exists per school year without loss of annuity The period of emergency service is limited to the length of the emergency itself per school year Generally, PSERS will not pre-approve emergency service beyond one school year

7. 7 PSERS’ EXPECTATIONS Before hiring a PSERS retiree under the Emergency provision, the employer must be able to demonstrate that other alternatives were sought Employer should be prepared upon request to provide to PSERS the nature of the emergency and the recruitment efforts the employer undertook to fill the position with a non- retiree

8. 8 RECRUITMENT EFFORTS Must be a “bona fide” recruitment effort Generally, proof of recruitment effort must include the method of advertising the vacant position, the total number of applicants, and the number of non-retirees that applied for the position If an employer requests approval to employ a retiree beyond one school year, or if PSERS is informed that a retiree has been employed for a period extending beyond one school year, a second request and approval is REQUIRED before PSERS would approve any emergency service

9. 9 EMPLOYMENT AS DAILY SUBSTITUTE There is much confusion among employers and members regarding a retiree’s ability to work as a daily substitute Substitute employment may be, but is not necessarily, emergency employment Generally, the same emergency rules apply – the vacancy must first be offered to non-retirees before employing a retiree as a substitute Generally, this process must be followed each day to ensure compliance with the Retirement Code

10. 10 EMPLOYMENT AS DAILY SUBSTITUTE (continued) An employer MAY use a subject-certified retiree before employing a non-retiree that is not certified in the particular subject, or before a non-retiree “guest teacher” (not certified). Example – Spanish Teacher The employer can also decide not to use the retiree – It is the employer’s decision, and it is not PSERS’ responsibility nor the intent of the Retirement Code to police the use of subject-certified personnel Our concern is that retirees are only employed in true emergency situations

11. 11 HOW PSERS IS NOTIFIED OF POSSIBLE RETURN TO SERVICE OR EMERGENCY SERVICE Receive written request for approval to employ retiree in an emergency capacity – may come from either the member or employer Anonymous phone call or letter from concerned member or citizen, or the media

12. 12 HOW PSERS IS NOTIFIED (continued) Member submits Purchase of Service application for time rendered while a retiree PSERS staff uncover data previously reported for a retiree from an employer This should be increasingly less frequent due to a system block that prohibits employers from automatically reporting retirees to PSERS

13. 13 HOW DOES PSERS RESPOND? Once notified, staff sends letter of inquiry to employer Depending on the notification, we will ask if member has returned to service or is working as an emergency employee or an emergency capacity We will ask for the nature of the emergency and recruitment efforts If it is a letter from an employer seeking pre-approval to employ a retiree in an emergency capacity, and they provide sufficient information, based on the facts we may be able to send an approval letter without further inquiry PSERS may also contact the member if appropriate

14. BAILLIE DECISION Baillie v Public School Employees’ Retirement Board, 993 A. 2d 944 (Pa. 2010) Announced intention to retire in January 2007, yet filled his own vacancy in an emergency capacity for remainder of school year PSERS determined that he had, in fact, never terminated service, and this position was upheld by the Commonwealth Court 14

15. BAILLIE DECISION (continued) PSERS has an obligation to review the emergency employment of annuitants, to ensure the employer has used reasonable judgment in declaring an emergency PSERS must properly administer the Retirement Code The Baillie Decision sets a precedent for future cases 15

16. 16 QUESTIONS?

17. 17 EXTRACURRICULAR EMPLOYMENT

18. 18 EXTRACURRICULAR EMPLOYMENT Another common misconception among PSERS retirees and employers is the difference between emergency and extracurricular employment These terms are not interchangeable and describe entirely different employment scenarios

19. 19 EXTRACURRICULAR EMPLOYMENT Extracurricular employment is defined by the Retirement Code as service that is performed primarily outside regular instructional hours and is not part of the mandated curriculum

20. 20 WHAT DOES THIS MEAN? Regular instructional hours refer to the school’s daily class schedule. If a school’s first period of class begins at 7:55 a.m. and the last period of class ends at 2:55 p.m., these times would represent the regular instructional hours of the school “Primarily” means more than half of the work must be performed outside normal instructional hours

21. 21 WHAT DOES THIS MEAN? (continued) Mandated curriculum refers to any classes that are part of the established academic course structure, and fulfill graduation requirements Some examples of extracurricular employment would include athletic directors, coaches, ticket takers at athletic events or school functions, and club sponsors

22. 22 Extracurricular Employment as Tutor Much like employment as a daily substitute, many employers and retirees are of the belief that tutoring is always permitted It is not At least half of the tutoring must be performed outside of normal instructional hours, and it must be separate from the established academic course structure

23. 23 EXTRACURRICULAR EMPLOYMENT Must also be performed under a separate employment contract, which must include a waiver whereby the retiree waives any potential retirement benefits that could arise from the employment, and releases the employer and PSERS from any liability for the payment of benefits There is no time limit associated with employment in an extracurricular position

24. 24 QUESTIONS?

25. 25 COLLEGE EMPLOYMENT

26. 26 COLLEGE EMPLOYMENT Notwithstanding being institutions of higher education, public colleges are still deemed to be “public schools” by the Retirement Code – Under the Retirement Code, “ school service ” is defined as service rendered as a school employee (24 Pa.C.S §8102) – A “ school employee ” is any person working for a public school (24 Pa.C.S §8102)

27. 27 COLLEGE EMPLOYMENT – A “ public school ” is defined as “ any or all schools … conducted under the order and superintendence of the Department of Education, including … state-owned colleges and universities, [PSU], community colleges, area vocational technical schools intermediate units, …” 24 Pa. C.S. §8102 Bottom line: Public colleges are employers under the Retirement Code and thus are subject to the provisions of the Retirement Code as they apply to active and retired members of PSERS, with some additional factors that must be considered as well

28. 28 COLLEGE EMPLOYMENT Approved post- retirement employment with Penn State University, ANY Community College and one of the 14 state- owned Universities is based on the member’s eligibility to elect an alternate retirement plan

29. 29 STATE-OWNED UNIVERSITIES Bloomsburg University California University Cheyney University Clarion University East Stroudsburg University Edinboro University Kutztown University Lock Haven University Indiana University of Pennsylvania (IUP) Mansfield University Millersville University Shippensburg University Slippery Rock University West Chester University

30. 30 COLLEGE EMPLOYMENT Generally, an employee of any of these colleges and universities may choose from three retirement plans – PSERS, SERS, or TIAA-CREF A PSERS retiree must be eligible to elect and enroll in either SERS or TIAA-CREF If a retiree does not meet eligibility requirements to elect an alternate retirement plan, they would default to PSERS as a retirement plan and become a Return-To-Service member The retiree must become eligible for an alternate retirement plan within the first year of employment with the college Retirees that have elected Multiple Service face an additional set of restrictions on possible college employment. These requests must be evaluated on a fact-specific basis

31. 31 COLLEGE EMPLOYMENT In addition, there must be a bona fide break in service from all employers for a retiree to elect an alternate retirement plan This means there can be no pre-arrangement for employment with the college prior to retirement A signed employment contract or letter of intent to return would constitute a pre- arrangement, and PSERS reserves the right to contact the college for evidence of a pre-arrangement

32. 32 Emergency College Employment Emergency employment at a college is not common, as there are generally many qualified people to fill the vacancy, or the college may choose not to offer the course that semester Generally, the same emergency rules apply with regards to recruitment efforts, length and nature of emergency

33. 33 Extracurricular College Employment A retiree may also be employed in an extracurricular capacity for a college. Because colleges offer for- credit courses during both day and evening hours, there generally are no normal instructional hours. It still must not involve instruction of mandated curriculum. Examples of approved extracurricular employment with a college would include tutoring, coaching, and non-credit course instruction

34. 34 QUESTIONS?

35. 35 INDEPENDENT CONTRACTOR

36. 36 INDEPENDENT CONTRACTOR Of all the different types of post-retirement employment, requests to work as an independent contractor can be the most difficult for both our members and staff We recommend that members put their specific requests in writing and mail them to the PSERS Headquarters in Harrisburg, so we may review the details of the arrangement and offer a formal determination

37. 37 INDEPENDENT CONTRACTOR In general, if a retired member is doing different work than they did while active Is paid under a Form 1099 with a separate written contract Receives no fringe benefits Sets his/her own hours Does not receive a performance evaluation Supplies his/her own work materials Has an office outside the school grounds This may indicate the member is an independent contractor

38. INDEPENDENT CONTRACTOR Zimmerman v. Public School Employees’ Retirement System, 522 A. 2d 43 (Pa. 1987) PSERS also uses the factors set forth in the Zimmerman case to determine if an individual is a school employee or an independent contractor 38

39. INDEPENDENT CONTRACTOR Zimmerman Factors The control of the manner in which the work is to be done Responsibility for the result Terms of agreement between the parties The nature of the work or occupation The skill required for the performance Whether one is engaged in a distinct occupation or business 39

40. INDEPENDENT CONTRACTOR Zimmerman Factors (continued) Which party supplied the tools Whether payment is by the time or by the job Whether the work is part of the regular business of the employer Whether the parties have the right to terminate employment at any time No factor is dispositive of one’s status 40

41. INDEPENDENT CONTRACTOR PSERS will almost never approve an annuitant to return to the same job or position simply by forming a Limited Liability Company (LLC) Positions such as Superintendent or teacher cannot be filled by an independent contractor, as these positions are normally filled by active, contributing members of PSERS 41

42. INDEPENDENT CONTRACTOR The types of positions that PSERS may approve as an independent contractor include: Bus Drivers Custodians Cafeteria Workers Some Payroll Functions If positions such as these are hired through a third party entity, PSERS is more likely to determine that they are not employees of the public school employer 42

43. 43 CONSULTANT/INDEPENDENT CONTRACTOR EMPLOYMENT There really are no absolutes or definite situations that are always approved or not approved when it comes to post- retirement employment as an independent contractor These requests truly must be reviewed on a case by case basis, and we must take all the factors into consideration before rendering a determination

44. 44 QUESTIONS?

45. 45 Current Communication Members – Active and retired member handbooks – Returning to School Service After Retirement pamphlet – Being Retired pamphlet – Your PSERS Benefits & Leaving Employment pamphlet – PSERS Disability Retirement Benefits pamphlet – PSERS website FAQ’s – Newsletter articles – Foundations for Your Future presentation – Retirement Exit Counseling presentation – Initial and final benefit letters Employers – Employer manual, newsletters, website and annual training workshops

46. 46 THANK YOU!!