Pension and a paycheck in doubt
The retirement system wants to stop workers from retiring early and returning to work.
Under a new proposal, state workers who used a 2001 law to retire early and return to work would be allowed both a pension and a paycheck.
But future retirees would not be so lucky.
The Maine State Retirement System has changed its plans to prohibit teachers, state troopers and others from receiving their pensions if they retire before age 60 and then return to work for the state.
A proposed new policy would allow current retirees to keep working, but not those who retire after May.
“We took into account that people had relied on the 2001 law, and reliance is a legal issue,” said Kay Evans, executive director of the Maine State Retirement System.
In 2001, the Legislature passed a law that allowed workers to retire and go back to work. Proponents said they wanted to entice teachers back into the classroom and give retirees a way to supplement their incomes.
But the law violates Internal Revenue Service policies for younger retirees.
State retirement officials hoped to fix the problem before the IRS got involved. This winter they proposed a new rule that would stop state workers from receiving pensions if they retired early and went back to work for the state.
Hundreds of workers contacted officials when the Retirement System asked for feedback. About 200 showed up at a public hearing Jan. 8.
The Maine Education Association, the state’s largest teachers’ union, called the proposal unfair since retirees made dramatic lifestyle and career decisions based on the promise of a pension.
At a meeting last week, the Retirement System’s Board of Trustees took a step back from the proposal, agreeing to a “grandfather clause” that would allow current retirees to work.
The MEA applauded the decision.
“We were certainly very happy the Board of Trustees saw the error of their ways,” said Steven Crouse, director of government relations for the union.
But workers who retire after May 3 would not be allowed to return to work. And Crouse said that could hurt school systems that have come to depend on them as foreign language teachers and substitute teachers, jobs that are extremely hard to fill.
“It is going to be somewhat of a sad result,” he said.
In Lewiston, benefits specialist Jackie Little agreed. Twenty-four retirees are working for the school system as substitute teachers, adult education teachers and substitute school nurses. Six are under 60 years old.
She also listed another concern.
“My first thought is, ‘I hope that wouldn’t force people to retire this year, all at once,'” she said.
At the Maine State Retirement System, Evans said her department has no choice.
If the IRS finds that Maine’s retirement system goes against federal regulations, it can revoke the state’s “qualified plan” status. Without that, state employees could not contribute pre-tax to their retirement accounts and retirement benefits would be taxed differently.
Even a “grandfather clause” doesn’t meet IRS policies. But officials said they couldn’t ignore the hundreds of workers who retired because of the 2001 law.
“That will be up to the IRS to assess that,” Evans said.
The Retirement System will hold another public hearing on the issue Thursday, March 11, at 9 a.m. in the Augusta Civic Center. A copy of the revised rule will be available at www.msrs.org by Friday.
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