Employees who retire from a VRS-covered position may work for any employer that does not participate in VRS and continue to receive their retirement benefits. If they return to covered employment with a VRS-participating employer, their benefits must stop.
Select from the following links for an overview of key provisions regarding retirees returning to work. For related resources, visit Working After Retirement at a Glance.
VRS administers a tax-qualified pension plan under Section 401(a) of the Internal Revenue Code. Under most circumstances, the Internal Revenue Code prohibits distributions from a qualified pension plan to members who are working for the employer from which they retired. For VRS, this includes:
Retirees who return to covered employment under a retirement plan administered by VRS (this is also prohibited under the Code of Virginia).
Retirees who return to non-covered employment with the employer from which they retired without a bona fide break in service.
Because federal requirements govern VRS retirement plans, non-compliance may result in penalties for employers and VRS. Members and retirees also may face tax consequences.
A bona fide break in service is a break of at least one calendar month from the effective date of retirement over a period the employee normally would work. Periods of leave with or without pay do not count toward satisfying this break in service. For retired teachers and faculty members, summer breaks, intersession periods, educational leave and sabbaticals also do not count toward satisfying this break.
Non-covered employment is a part-time position with a VRS-participating employer. Non-covered positions do not provide eligibility for benefits. Part-time positions typically require 80 percent or less of the hours of comparable full-time permanent positions. Some full-time positions may be considered non-covered if they are temporary and require 80 percent or less of the hours per year that would be considered full-time and permanent for that position. Note that some permanent salaried part-time state positions are covered under VRS.
If you hire a retiree in a position that would be considered covered and do not report the retiree to VRS, or if you hire a retired former employee in a non-covered position without a bona fide break in service, you may be liable for repaying any retirement benefits the retiree receives while working in the position.
As provided in Section 51.1-124.9(B) of the Code of Virginia, VRS is authorized to collect benefit overpayments from the employer, not the retiree, in cases where the employer does not comply with return-to-work provisions. This section also provides for the collection of overpayments from the employer if the employer grants a salary increase to an employee who is preparing to retire and the salary increase is not related to a promotion and the primary purpose is to increase the retiree’s benefit.
Retirees can continue to receive their benefits if they work for an employer that does not participate in VRS. This includes retirees on disability, provided they are not performing the same or similar duties as those they performed before disability retirement.
In some cases, retirees can continue to receive their benefits if they work in a non-covered position for a VRS-participating employer. Retirees on disability will forfeit their benefits if they work in a non-covered position performing the same or similar duties as those they performed before disability retirement.
Retirees who return to non-covered employment with the employer from which they retired will continue to receive their retirement benefits if they have a bona fide break in service. The Commonwealth of Virginia, including all state agencies and public colleges and universities, is considered one employer. School divisions and political subdivisions are considered separate employers.
There can be no verbal or written offer of reemployment between you and the employee as certified on the Application for Service Retirement (VRS-5) or the Application for Disability Retirement (VRS-6).
If a retiree returns to covered employment, his or her benefits must stop. The retiree will resume active membership.
For retirees who return to work and then retire again, any cost-of-living adjustments they were receiving during their previous retirement will not resume into their next retirement. They will become eligible for the COLA effective July 1 of the second calendar year after their subsequent retirement date. The COLA will be calculated as if they are retiring for the first time. Read more about the COLA.