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News

Department of Employee Trust Funds
Revised September 25, 2013

Recent Changes to Your WRS Benefits
Due to 2013 Wisconsin Act 20

2013 Wisconsin Act 20 contains provisions that affect the Wisconsin Retirement System (WRS) administered by the Department of Employee Trust Funds (ETF).

Recent changes to the WRS include:

  • An increase from 30 to 75 days in the required minimum period of separation from all WRS employment before returning to work for a WRS participating employer for participating employees with termination dates after July 1, 2013;
  • Automatic suspension of annuity upon returning to work for a WRS participating employer in a position in which the participant is expected to work at least two-thirds of full time for participating employees with termination dates after July 1, 2013; and
  • Eligibility for employees who were first hired by a WRS participating employer before July 1, 2011.

Please check the ETF website regularly for new information and additional resources.

Questions about Changes to WRS Benefits

As background, ETF is responsible for administering the WRS. The WRS is a federal Internal Revenue Code §401(a) defined benefit plan. This means the WRS must remain in compliance with Internal Revenue Service (IRS) regulations that require a retiring employee to have a good faith termination from employment and a separation from service.

Increased Minimum Break in Service for Rehired Annuitants

1) What is the new minimum break in service requirement?

Under the new law, effective July 2, 2013, a WRS participant who has applied to receive a retirement benefit must wait at least 75 days between termination and returning to WRS eligible employment. If the participant is rehired in a WRS-eligible position by a WRS employer before the expiration of the 75 days, the participant is not eligible to receive a WRS benefit (WRS annuity or lump sum) and the person must repay any benefit payments paid by the WRS.

2) What is the effective date for the new 75-day break in service?

The 75-day provision first applies to any WRS participating employee who terminates employment after July 1, 2013. If you terminated your WRS employment on or before July 1, 2013, the 30-day minimum break in service requirement applies to you.

3) Is the break in service calendar days or work days?

The 30- or 75-day break in service is based on calendar days.

4) When does the 30- or 75-day break in service begin running?

Annuitants who terminated WRS participating employment prior to July 2, 2013 have met the break in service requirement if they remain terminated from all WRS participating employment between the date of termination and the latest of:

  • The day after the effective date of the annuity;
  • The 31st day after termination;
  • The 31st day after ETF received an application for a benefit.

Annuitants who terminated WRS participating employment on or after July 2, 2013 have met the break in service requirement if they remain terminated from all WRS participating employment between the date of termination and the latest of:

  • The day after the effective date of the annuity;
  • The 76th day after termination;
  • The 76th day after ETF received an application for a benefit.

For more information, see ETF’s Rehired Annuitant Form (ET-2319)

5) Why must there be a break between retirement and returning to WRS service?

A break in service from employment is a requirement for tax-qualified retirement plans such as the WRS under the federal Internal Revenue Code. The Internal Revenue Code does not dictate a specific waiting period, but requires that retirement benefits generally cannot be distributed to members unless there has been a clear indication of complete severance of the employment relationship with the former employer(s). State law defines the specific waiting period as 30 days or 75 days.

6) I am going to retire soon. Does the 75-day break-in-service provision affect when I will receive my first retirement annuity payment?

No. The break-in-service provision only applies to an annuitant returning to WRS service.

7) What if I retire from WRS employment and return to work for a non-WRS employer?

There are no WRS break-in-service requirements if you return to work for an employer that does not participate in the WRS.

8) I terminated my WRS employment after July 1, 2013, but have not applied for an annuity. Does the waiting period affect me?

No. The requirement only applies when you are an annuitant returning to WRS service.

9) I terminated WRS employment prior to July 2, 2013 and receive a WRS annuity. I currently don't work, but I am considering returning to work for a WRS employer. Does the new 75-day requirement apply to me?

No, you are subject to the 30-day waiting period because you terminated WRS participating employment prior to July 2, 2013.


Rehired Annuitant “Two-Thirds” Provision

10) What is the new “two-thirds” time requirement for rehired annuitants?

Prior to July 2, 2013, a WRS annuitant who returned to a WRS employer in a WRS-eligible position had an option either to suspend the annuity and again become a WRS-participating employee or continue to receive the annuity as well as wages, but not to receive WRS benefits from the employer including insurance benefits.

Under the new law, if a WRS annuitant, or a disability annuitant who has attained his or her normal retirement date, is appointed to a position with a WRS-participating employer, in which he or she is expected to work at least two-thirds of what ETF considers full-time employment, the annuity must be suspended and no annuity payment is payable until after the participant again terminates covered employment. The hours and earnings from the new period of employment is WRS reportable.

The new law providing for the suspension of an annuity also applies to a disability annuitant who has attained normal retirement age, enters into a contract to provide employee services for a WRS employer and is expected to work at least two-thirds of full-time employment for at least 12 months.

11) When is the “two-thirds” time provision effective?

This provision applies to participating employees who terminate all WRS employment after July 1, 2013. WRS retirees who return to work but retired before July 2, 2013 still have the option to elect to collect an annuity or suspend the annuity and re-enroll in the WRS as an active employee.

12) What is considered two-thirds time?

Two-thirds of full time per year is:

  • 1,200 hours for general personnel.
  • 880 hours for teachers and school district educational support staff (not including educational support staff for technical colleges and other educational institutions).


13) I am an annuitant who terminated employment prior to July 2, 2013. I have not returned to work for a WRS employer. Would this two-thirds provision apply to me if I did go back to work for a WRS employer on or after July 2, 2013?

No, it would not apply to your first instance of reemployment with a WRS employer. Whether it would apply to you during subsequent periods of reemployment would depend on whether you chose to continue receiving your WRS annuity, or whether you chose to suspend your annuity payments and reestablish your WRS account as a WRS participating employee. If you chose to continue receiving your WRS annuity, you would remain grandfathered under the old rehired annuitant provisions (30-day break in service, elect to continue or suspend annuity). If you elect to suspend your annuity and reestablish your WRS account as a WRS participating employee, when you subsequently terminate that employment, the new rehired annuitant provisions (75-day break in service, automatic suspension of annuity upon expectation of two-thirds of full-time employment) would apply to you because your new WRS termination date of record will be after July 2, 2013.


14) I am currently a re-hired annuitant at a WRS employer. My initial WRS termination was before July 2, 2013. I work full time and have not elected to become a participating employee. Under the new law, would I be required to suspend my annuity and become a participating employee?

No. Because you terminated participating employment prior to the effective date of the provision, the two-thirds threshold does not apply to your situation; you continue to have the right to elect or not elect to suspend your annuity and come back under the WRS.

15) I am an annuitant who terminated WRS participating employment after July 1, 2013. I met the legal requirements for a valid termination and separation from service, and subsequently returned to work for a WRS employer. When I began my new position, my employer expected me to work for more than 12 months at less than two-thirds of full time. Circumstances changed, and I am now working at least two-thirds of full time. What happens next?

At the point the expectation changed, you are required to fill out a new Rehired Annuitant form (ET-2319, Revised 8/13) with your employer. Your annuity will be suspended the first of the month after the date the expectation changed or you met the hourly two-thirds WRS eligibility requirement, whichever came first.

16) I am an annuitant who terminated WRS participating employment after July 1, 2013. I met the legal requirements for a valid termination and separation from service, and I am thinking of returning to work. If I work for more than one WRS employer, would my hours worked at both employers be added together to determine whether I was working two-thirds of full time?

No. WRS eligibility is determined on an employer-by-employer basis. If you are an annuitant returning to work for two different WRS employers, hours worked for each employer would not be added together to determine whether you would meet the two-thirds-of-full-time standard for suspension of your annuity. Each employer determines WRS eligibility separately.

17) I am an annuitant who terminated WRS participating employment after July 1, 2013. I met the legal requirements for a valid termination and separation from service, and I am thinking of returning to work. If I work for the same WRS employer in more than one position, would my total hours worked be added together to determine whether I was working two-thirds of full time?

Yes. If you are an annuitant returning to work for a WRS employer in more than one position, your total hours worked for that employer would be combined, and if you were expected to work a total of two-thirds of full time for one year, your annuity would be suspended.

The exception to this rule would be if your WRS participating employer has positions that are not covered under the WRS. For example, some school districts only cover their teachers under the WRS, so if you worked as a substitute teacher and a janitor, only the teaching hours would count toward the two-thirds-of-full-time criterion.

18) How do I notify ETF that I have returned to service as a participating employee and need to suspend my annuity?

All WRS annuitants returning to work for a WRS participating employer are required to fill out a Rehired Annuitant Form (ET-2319) with your employer. This form is available from your employer and provides you with the information needed to determine whether you qualify to elect to participate in the WRS or whether your WRS annuity will mandatorily be suspended.

19) I am an annuitant who terminated WRS participating employment after July 1, 2013. I met the legal requirements for a valid termination and separation from service, and subsequently entered into a contract with a WRS employer to return to work. Does the new law require that my annuity be suspended if I am expected to work at least two-thirds of full time for 12 months?

If an annuitant directly enters into a contract with a WRS employer to work at least two-thirds of full time for 12 months or more, Act 20 requires the annuity be suspended until he or she again terminates employment. The new law was not intended to apply to annuitants who return to work via a third-party contract.

20) I recently terminated WRS employment, and I am considering returning to work for a WRS employer in a contract position. As an annuitant, would I need to have a good faith termination and fulfill a minimum break in service before returning to work?

As noted in question and answer 5, the IRS generally requires that there exist a clear indication of the complete severance of the employment relationship with a participant’s former employer for a participant to be eligible for a retirement benefit. Evidence of that complete severance includes both a good faith termination and break in service. If a question were to later arise about your intent to retire, ETF would look at all of the circumstances surrounding your termination and return to work to determine whether a good faith termination existed.

21) If my annuity is suspended because I entered into a contract with my former WRS employer to return to work two-thirds or more of full-time employment for at least 12 months, would my employer have to reenroll me in the WRS?

No. A contractor is not WRS eligible.

However, if you once again became an employee of a WRS employer and were expected to work two-thirds or more of full-time employment for at least 12 months, the suspension of your annuity would continue and your employer would be required to re-enroll you in the WRS, with current earnings and service credited to your WRS account.


22) I am an annuitant who terminated WRS participating employment after July 1, 2013. I met the legal requirements for a valid termination and separation from service, and subsequently returned to work for a WRS employer. If I am expected to work at least one-third of full-time for 12 months or more, but less than two-thirds of full-time, would I have the right to elect to continue to receive my annuity, or have my annuity suspended and reestablish my WRS account as a WRS participating employee?

Yes. If you terminated WRS participating employment after July 1, 2013 and, as an annuitant, you subsequently return to work in a WRS-eligible position working at least one-third of full-time, but less than two-thirds of full-time, you could elect to continue receiving your annuity payments, or have your annuity suspended and become a WRS participating employee.

General Questions Regarding Rehired Annuitants

23) Am I allowed to discuss future employment opportunities prior to my termination from employment?

IRS guidance regarding what constitutes a good faith termination reflects that there must be a complete separation of the employee-employer relationship. The IRS focuses on the intent of the employee to completely retire, with no prior arrangements to return to work for the employer. Wisconsin state statutes and the administrative code reflect IRS requirements for a good faith termination and separation from service.

Wisconsin Administrative Code § ETF 10.08 lists the requirements of a valid termination from WRS-covered employment. That rule prohibits an agreement as of the termination date for any future WRS paid employment with the same employer, whether or not the position is WRS-eligible. The rule also prohibits an agreement as of the termination date for future employment with a different WRS employer that would meet WRS participation standards. This means while state law does not prohibit all discussions about future employment with a WRS employer before an employee’s termination, evidence of discussions of future employment may call into question whether the subsequent termination was in good faith.

24) After I terminate employment, am I allowed to discuss future employment opportunities with my former employer during the break in service?

Yes, those conversations may occur. Be aware, though, that if a question later arises about whether you had a good faith termination, ETF would look at all of the circumstances surrounding your termination and return to work to determine whether there was a good faith termination and whether the minimum break in service was met.

Note: Act 20 made no changes to Wisconsin state statutes or administrative code with respect to discussions of future employment with a WRS employer with the exception of the length of the break in service that would apply. These questions and answers appear here based on feedback ETF has received since the effective date of Act 20.

 

Eligibility for Employees Who Were Hired by a WRS Employer Before July 1, 2011

25) What is the change to the eligibility provision?

2011 Wisconsin Act 32 increased the number of hours that an employee must be expected to work in order to become a WRS participating employee from one-third of what is considered full-time employment to two-thirds of what is considered full-time employment.

Under 2011 Wisconsin Act 32, this change did not apply to employees who were “initially employed” by a WRS employer before July 1, 2011, regardless of whether they were WRS participating employees before that date. This provision provides that, to be exempt from the two-thirds of full time criterion, employees must have been WRS participating employees before July 1, 2011. This will make it easier for employers to determine whether the old or the new hourly eligibility criteria apply.

26) Who does this affect?

This clarification only affects those individuals who begin work as WRS participating employees after July 1, 2013. If you are currently a participating employee this change has no effect on your eligibility rights.

Information Specific to Employers

In addition to the general information provided above, this section includes technical guidance based on questions ETF has received from employers. In sum, there are two key dates for employers to remember when implementing Act 20 changes:

  • July 2, 2013 for Rehired Annuitants
  • July 1, 2011 for General WRS Eligibility Evaluation

Rehired Annuitants

27) Why is July 2, 2013 the key date for employers to remember in connection with rehired annuitants?

If a WRS participating employee terminated employment on or after July 2, 2013, the Act 20 rehired annuitant laws apply with respect to the a) minimum 75-day break in service and the b) automatic suspension of the annuity if an employee is expected to work two-thirds of full-time employment for at least 12 months.

Note: A WRS “participating employee” is an employee working in a WRS-eligible position whose earnings are subject to WRS contributions. An annuitant who terminated WRS participating employment prior to July 2, 2013 and never elected to suspend his or her annuity and become a WRS participating employee again would be grandfathered under the pre-Act 20 rehired annuitant laws. Those laws provided for a minimum 30-day break in service and gave an employee returning to a WRS-eligible position the option to elect WRS participation or continue receiving an annuity. If at some point the annuitant elected WRS participation, upon termination from that employment and subsequent reemployment with a WRS employer, the annuitant would be subject to the Act 20 requirements.

28) An employee terminated WRS participating employment on or after July 2, 2013, met the legal requirements for a valid termination and separation from service, and subsequently returned to work for a WRS employer. When the employee began work, the employer expected him or her to work less than 12 months at less than two-thirds of full time. That expectation changed and the employee is now expected to work for at least a year at two-thirds of full-time employment. What happens next?

At the point the expectations changed, the employee and employer are required to fill out a new Rehired Annuitant Form (ET-2319, Revised version 8/13). The annuity will be suspended the first of the month after the date the expectation in employment changed and the employee’s hours and earnings from that point on are WRS reportable.

Note: Because the annuity suspension is effective the first of the month following the date the employee is WRS eligible, it is imperative that the Rehired Annuitant form be completed and submitted to ETF immediately to ensure no back annuity payments are owed.

29) An employee terminated WRS participating employment on or after July 2, 2013, met the legal requirements for a valid termination and separation from service, and subsequently returned to work for a WRS employer. The employment contract requires the employee to work 60% of full time in the spring of 2014 and 60% of full time in the spring of 2015. Because the new law requires an annuity to be suspended if an annuitant works at least 12 months at two-thirds of full-time employment, could the annuity be suspended at some point during that contract?

Possibly. The employee’s eligibility would need to be evaluated in three ways:

  • At the start of employment, the employer must evaluate whether the employee is expected to work two-thirds of full time for at least 12 months. If an employee is expected to work two-thirds of full time for at least 12 months, the annuity would be suspended and he or she would once again become a WRS participating employee.

  • If an annuitant is not expected to work two-thirds of full time at the time of employment in the spring of 2014, the employer would be required to continue monitoring whether that expectation might change. If at some point the employer developed the expectation that the annuitant would work two-thirds of full time, the annuity would be suspended and he or she would once again become a WRS participating employee.

  • On the annuitant’s one-year anniversary of employment, if the annuitant has not met the two-thirds-of-full-time hourly threshold, the employer would be required to continuously monitor his or her employment to determine whether the annuitant might meet that threshold in any 12 consecutive months of employment. If the annuitant were to meet that threshold, at that point the annuity would be suspended as of the first day of the following month, and the employee would once again become a WRS participating employee.

In sum, it is important for employers to continuously monitor rehired annuitants who are not expected upon hire to work two-thirds of full-time employment for at least 12 months in the event that expectations change.

General WRS Eligibility Evaluation

30) Why is July 1, 2011 the key date for employers to remember when evaluating an employee for WRS eligibility?

If an individual was a WRS participating employee prior to July 1, 2011, that individual would be evaluated under the old WRS eligibility standard of one-third of full-time employment (440 hours for teachers and school district educational support personnel/600 hours for all other categories). Anyone who first became a participating employee on or after July 2, 2013 would be evaluated for WRS eligibility under the two-thirds of full-time employment (880 hours for teachers and school district educational support personnel/1200 hours for all other categories) standard. Also evaluated under the two-thirds-of- full-time employment standard would be any employee who was a participating employee prior to July 1, 2011, but who subsequently took a WRS separation or lump sum benefit.


31) Is there a way for employers to check whether an employee was a WRS participating employee prior to July 1, 2011?

Yes. Employers who have access to ETF’s Online Employer Network (ONE) System may conduct a Previous Service and Benefits Inquiry search by employee name or Social Security Number.


32) An employee began work for a WRS employer on or after July 1, 2011. That employee was evaluated for WRS eligibility upon employment under the 2011 Act 32 standard that the employee must have been “initially employed” by a WRS employer prior to July 1, 2011 in order to come under the one-third-of-full-time -employment eligibility standard.

Though the employee had been “initially employed” by a WRS employer prior to July 1, 2011, the employee had never previously been WRS eligible. From July 1, 2011 until July 1, 2013, the employee was evaluated for WRS eligibility under the one-third-of-full-time eligibility criteria (600/440), but never met the requirements. On or after July 2, 2013, what eligibility criteria would an employer use to determine the employee’s WRS eligibility?

If an employee who had never previously been WRS eligible started work for an employer on or after July 1, 2011 and did not become WRS eligible until on or after July 2, 2013, the employee would be subject to the new eligibility criteria created in Act 32 requiring two-thirds of full-time employment (1200/880). For example, a limited term employee (LTE) who started work prior to July 2, 2013 but who had not yet been deemed WRS eligible would be evaluated under the two-thirds-of-full-time-employment standard.

 

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