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.
Retirees who return to covered employment will be rehired under the currently applicable retirement plan for that position.
Upon employment in a covered position, the retiree's benefits must stop effective with the date of the new position.
Counsel employees about the possible impact on a subsequent retirement benefit should they "un-retire" (retire and then return to covered employment). Upon subsequent retirement, the benefit calculation will include the additional service credit earned upon reemployment as well as any increase in average final compensation. In many cases, that will result in a higher subsequent benefit than the previous retirement benefit. However, depending on their circumstances, the next benefit may actually be less.
If a retiree is receiving cost-of-living adjustments (COLAs) and returns to covered employment, the COLAs will not resume upon subsequent retirement. As a result, the subsequent benefit may be less than the previous benefit, especially if the retiree has been receiving the COLA for several years. The retiree will become eligible for a COLA effective July 1 of the second calendar year after his or subsequent retirement date. The COLA will be calculated as if the retiree is retiring for the first time.
Employees who retired under a severance program administered by VRS will lose any additional retirement credits used to calculate their retirement benefit upon subsequent retirement. This may affect whether or not the retiree's next benefit is less than the current benefit amount.
Retirees on disability who return to covered employment will retire under service retirement when they retire again. The period of time they were retired on disability will be included in the calculation of their service retirement benefit. If a former disability retiree wishes to retire on disability again, he or she must reapply by submitting all required disability retirement forms and documents. The application will be evaluated under the medical review process based on the duties the new position.
Retirees may work in a non-covered part-time teaching or adjunct faculty position with their former employer and continue to receive retirement benefits, provided they have a bona fide break in service of at least one full calendar month from their retirement date over a period they normally would work. This includes teachers who retire under an early retirement incentive program (ERIP). If retirees work in more than one part-time position for their former employer, the total number of hours must not exceed a part-time schedule.
Periods of leave with or without pay, including educational leave and sabbaticals, as well as intersession periods do not count toward satisfying the bona fide break in service. Summer breaks for employees on nine-, 10- and 11-month contracts also do not satisfy this break.
A teacher on a nine-month contract for the period August 1 to May 31 is retiring at the end of the contract. If the teacher wishes to return to the same employer on a part-time basis, the months of June, July and August will not count toward satisfying the bona fide break in service. To continue receiving retirement benefits, the earliest the retiree could return to work would be September 1.
A teacher on a 10-month contract for the period August 20 to June 15 is retiring at the end of the contract. If the teacher wishes to return to the same employer on a part-time basis, the months of July and August will not count toward satisfying the bona fide break in service. To continue receiving retirement benefits, the earliest the retiree could return to work would be October 1.
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.
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.