Retirees Returning to Work
Employees who retire under VRS may work for any non-VRS employer 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. Select from the key topics in the right column for more details.
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).
Covered employment is a full-time permanent, salaried position with an employer that participates in the Virginia Retirement System (VRS) or under an optional retirement plan (ORP) administered by VRS. Some part-time permanent, salaried state positions and non-adjunct faculty positions requiring at least 20 hours, but less than 40 hours a week, also are covered under VRS.
Retirees who return to non-covered employment with the employer from which they retired without a bona fide break in service.
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 less than 80 percent of the hours of comparable full-time permanent positions. Some full-time positions may be considered non-covered if they are temporary and require less than 80 percent of the hours per year that would be considered full-time and permanent for that position.
Because federal requirements govern the VRS retirement plans, non-compliance may result in penalties for employers and VRS. Members and retirees also may face tax consequences.
What is a Bona Fide Break in Service?
A bona fide break in service is a break of at least one full 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.
What is Non-Covered Employment?
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.
Collection of Benefit Overpayments
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 a retiree not related to a promotion and the primary purpose is to increase the retiree's benefit.