Employment after retirement
PENSION BENEFITS REPORT
PETER
ANDREYEV
In case you missed it, we had posted on our
website the fact sheet that pertains to employment after retirement. The Division of Pensions
did a good job explaining this issue through
Fact Sheet 86, which was just released. If you
didn’t get a chance to see the fact sheet, I will
provide you with a brief overview of it.
If you didn’t know, our pension is considered
a defined benefit plan and is recognized as a
qualified governmental defined benefit plan
under Internal Revenue Code (IRC) section 401(a) and 414(d).
In order to maintain this status with the government and to
protect retirees from a 10-percent early distribution tax
penalty on monthly pensions, the Division of Pensions had to
adopt Internal Revenue Code regulations and is required to
enforce these regulations so that they are in compliance with
the Internal Revenue Code requirements. That said, there are
some financial penalties that can be imposed if you violate the
rules for post-retirement employment. In some instances,
when a member violates these restrictions, the member will
be responsible for repayment of any benefits that the member
was not entitled to receive. The member’s retirement benefits
may be suspended or canceled entirely and then would have
to re-enroll in the PFRS or a different retirement system and
make contributions into that particular system. A bona fide
severance of employment for a member to be eligible for
retirement benefits is required by the IRS to maintain the taxqualified status of the pension plans.
If you want to be considered a bona fide retiree, a member
must have a separation of employment with the same
employer for 180 days and not make any prearrangement with
the same employer to return to work after retirement.
For those that are seeking employment with another New
Jersey governmental agency, you must wait 30 days for your
pension to become due and payable before starting to look for
or accept any employment with another agency. The member
would be subject to the same penalties as if they returned to
work for the same employer, and it would not be considered a
bona fide separation if you do not wait the 30 days to go to
work for another governmental employer. The separation
period does not apply if you wish to work for a private sector
employer, an out-of-state governmental agency or the federal
government.
If a member does not separate from their employer for 180
days, then that is not considered a bona fide severance of
employment. If the member came back to the same employer
and was not considered a bona fide retiree and took a position
that otherwise should be a PFRS job, the member would be
required to re-enroll into the pension system that the job title
is under. The member would then be treated as an active
employee and enrolled into the membership tier in effect at
the time they returned to work. So, if you retired as a Tier 1
PFRS member and you came back with the same employer in
a position that requires you to be enrolled into the PFRS, you
would then be re-enrolled into the PFRS under the Tier 3
membership and make contributions under Tier 3 stipulations. If you were required to re-enroll into the PFRS, your
retirement allowance and any related health benefits will be
canceled for the duration of your employment after you
retired and continue to work in that position.
Basically it comes down to this: Wait 180 days if you want to
return to work for your same employer; do not make any prearrangement to return to work for your same employer. If you
want to work for another municipality, county or state agency,
wait 30 days after your pension becomes due and payable to
look for or apply for any job with an employer other than
yours. If you’re confused by this, please see Fact Sheet 86 on
our website or contact me at the PBA office. d
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Edmond P. Brady, CPA – Partner
[email protected]
Obtain reinstatement of revoked IRS
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Responsible for more than 300 PBA’s in
New Jersey and New York
Licensed in NJ, NY and Mass.
Livingston, NJ • New York, NY
Phone (973) 535-2880 • www.odpkf.com
www.njcopsmagazine.com
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OCTOBER 2015
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