As we briefly reported in the September Voice, the Fiscal '05 Budget created a new pension law (Section 105, Chapter 32) which allows public retirees to resume full-time work, at the state or local levels, and once again become a member of the retirement system. It must be noted that disability retirees, who wish to return to work, cannot do so by way of Section 105 and must still comply with current law governing their return to work (Section 8, Chapter 32).

To be reinstated, a retiree must satisfy certain conditions and agree to possibly incur a substantial cost. Foremost among the conditions is that the retiree must pay back the total amount of the retirement allowance they received while they were retired, plus interest. According to the Public Employee Retirement Administration Commission (PERAC), the retiree must reimburse the retirement system, from which the pension was paid, either in a lump sum or installments as determined by the retirement board.

Additionally, the retiree must work and contribute to the pension system for at least five years. If you work less than 5 years, no creditable service will be granted for the years during which you returned to work, and you will be refunded all the money, plus interest, paid into the retirement system while working then. Editor's Note: A member, who worked for less than 5 years and obtained a refund of his payments, would then resume the pension that he received before returning to work.

Section 105 also addresses the scenario of a retiree who returns to work for more than 5 years, but fails to pay back all the retirement allowance, that he received before resuming work. When they retire for a second time, the retirement board can grant proportional service. For example, if the retiree paid back only one-half, then they would be credited with one-half of the total years served before they returned to work.

According to Legislative Chairman Bill Hill, "There are some other features to the new law that members, who might be interested in rejoining, should know before considering it further. First, in your new job, you don't contribute into the pensions system at the percentage rate that you paid when you worked previously. Instead, you pay at the rate in effect when you waive your pension to become re-employed (or when you are actually reinstated, whichever is earlier), which is currently 9% plus an additional 2% on wages over $30,000."

Also, the interest rate, at which you pay back the retirement allowance that you've received, will be much higher. It is not regular passbook savings interest.

A retiree is required to pay the interest rate that the retirement system assumes it will earn on its investments. This means that the interest rate could be as much as 8% or more, and not just 2 or 3% - a substantial difference.

"We expect that while there may be interest in the new law, there may be few takers because of the high costs that must be borne by the retiree in most cases," comments Hill. "It may make sense for a retiree who had 20 or more years on the books, was laid off and has been collecting a pension for a brief time and now has the chance to return. Otherwise, for anyone who's been out for any length of time, the payback would simply be prohibitive."

Before going to press, we spoke with State Retirement Board officials about the new law. According to Executive Director Nick Favorito, "At this early stage, our office has received some inquiries, but little serious interest in completing the reinstatement process. A better assessment of the law's impact can be made at a later date as more and more retirees learn about it."