Hiring a VRS Retiree? Avoid Costly Mistakes

August 2023
text saying avoid missteps and a photo of an older worker looking at a laptop

If your prospective new hire previously retired from your organization or a different VRS-participating employer, there are considerations before you both sign the hiring agreement.

By following best practices, you'll avoid liability for any benefit overpayments, and the retiree will be aware of how returning to work impacts their benefits.

Review the Options

There are three ways a retiree can return to work with a VRS-participating employer:

  • Return to active employment in a VRS-covered position.
  • Return in a non-covered position (part-time), following specific rules.
  • Serve full-time in a critical shortage position in a school division, following certain rules and eligibility requirements.

Avoid Overpayments

Hiring a retired former employee in a non-covered position without a bona fide break in service, may result in the employer repaying any retirement benefits the retiree receives while working in the position, as well as the employer having to submit payroll corrections for the period, which could be at actuarial cost.

VRS would collect benefit overpayments from the employer, not the retiree, in cases where the employer does not follow return-to-work provisions. These Code of Virginia requirements adhere to IRS rules and help ensure the long-term viability of the VRS Trust Fund.

Know the Rules

Retirees may work in a non-covered position with a VRS-participating employer and continue to receive their retirement benefit under certain circumstances. Here are the rules:

  1. Require bona fide break in service.
    Before retirees can return to work in any capacity for the VRS-participating employer from which they retired, they must have a break in service of at least one full calendar month during a period they would normally work.
  2. Make no pre-arrangements.
    There can be no verbal or written offer of re-employment between you and the employee before retirement.
  3. Work 80% or fewer hours.
    If a retiree returns to part-time, non-covered employment, the hours worked must be 80% or less than a full-time equivalent position.
  4. Do not reclassify positions to accommodate retirees.
    You cannot designate a position as non-VRS-covered simply to accommodate a retiree in the position.
  5. Be aware that disability retirees returning to work may forfeit benefits.
    If an employee retires on disability and accepts a position that requires the same or similar duties as the employee performed in his or her previous position, disability retirement benefits will end.

Schools Have Additional Options When Hiring Retirees

Certain school division jobs may be designated as critical shortage – teachers, administrators, school specialized student support positions and bus drivers – and eligible retirees may work full time in those positions. The Virginia Department of Education designates critical shortage areas annually or a school division may designate critical shortage positions under certain circumstances.

Additionally, retired sworn law-enforcement officers may be eligible to return to work full time as a retiree school security officer at a Virginia public school.

If retirees qualify to fill these positions, they will continue to receive retirement benefits. They will not earn additional service credit, and they will not be eligible for VRS member benefits. Retirees may return to work in these roles after a six-month break in service during which they do not work for any VRS-participating employer in any capacity.

Employers must report critical shortage employees and retiree school security officers to VRS and submit employer contributions for these positions. Eligibility is certified annually by submitting the appropriate form, either VRS-160, VRS-160C, VRS-160D, or VRS-160S.

Additional VRS Resources