How Part-Time Employment Affects Your Benefits

ET-2121, Rev. 10/2003

As an eligible public employee you have retirement coverage under the Wisconsin Retirement System (WRS), and you may have other related insurance benefits offered through your employer. This document is intended to help you understand what effect working part-time has on your retirement and other benefits (as compared to working full-time). It may be particularly helpful to those who work part-time on a regular basis and to those who choose part-time employment as a way to phase into retirement after working as a full-time employee.

RETIREMENT BENEFITS

When you retire, your retirement benefit is calculated by two separate methods: formula and money purchase. You are automatically paid the higher of the two calculations.

Money purchase retirement benefits are based on only two factors: the amount of money in your WRS account (the "Money Purchase" account balance shown your annual "Statement of Benefits"), and your age at the time your retirement benefit begins. If you change from full-time to part-time employment, your annual earnings will normally be lower. The contributions to your account are based on the amount of your earnings, and if your annual earnings decrease, the contributions to your account will be less. This would result in a lower money purchase balance in your account when you retire than if you had continued to work full-time. This is the only effect that changing to part-time employment would have on your money purchase retirement benefit.

Your formula retirement benefit is calculated based on your final average earnings, a formula factor based on your employment category, your years of creditable service and any applicable age reduction factor. Changing from full-time to part-time employment affects your final average earnings and the amount of creditable service you earn. If you were a general, teacher, or educational support employee and you retire before age 65 with less than 30 years of creditable service, it would affect your formula age reduction factor. The age is 62 for executives and state elected employees and 54 for protective employees.

How Part-Time Service Affects Your Years of WRS Creditable Service

If you work part-time, your years of creditable service used to calculate your formula retirement benefit continue to increase, but at a slower rate than if you were full-time. Your service increases each year by the decimal fraction of a year of service that you earn each year.

The fraction of a year of service that you earn is not calculated based on the "full-time equivalency" of your part-time employment. Working "half-time" does not mean that you will earn exactly .50 year of service. The decimal fraction of a year that is credited to your WRS account each year is calculated by dividing the number of hours you worked in that year by the number of hours necessary to earn a full year of creditable service. The number of hours needed to earn a full year of service is different for teachers and non-teachers, and therefore the divisor used to calculate the fraction of a year will be different for teachers and non-teachers.

Teachers: Teachers must work 1,320 hours in a fiscal year (July 1 – June 30) to earn a full year of creditable service, so 1,320 is the divisor used to calculate the decimal fraction of a year of service credited for a teacher who works part-time.

Example: 845 hours are reported for a part-time teacher for a fiscal year. The Department credits .64 year of service to that teacher's WRS account.

845 hours ÷ 1,320 (hours) = .64 years of service

Non-teachers: Non-teachers must work 1,904 hours in a fiscal or calendar year (whichever annual earnings period applies to their employment category) to earn a full year of creditable service. Therefore, 1,904 is the divisor used to calculate the decimal fraction of a year of service credited for a non-teacher who works part-time.

Example: 920 hours are reported for a part-time non-teacher for a year. The Department credits .48 year of service to that person's WRS account.

920 hours ÷ 1,904 (hours) = .48 years of service

How Part-Time Service Affects Your WRS Final Average Monthly Earnings

Your final average monthly earnings is the sum of your three highest years salaries (regardless of whether you worked full- or part-time during those years), divided by the total years of creditable service in those three years, then divided by 12. Consequently, if your annual earnings during your part-time years are less than your highest annual earnings from previous (full-time) years, the final average monthly earnings used to calculate your formula benefit is "frozen" at your earnings level from your full-time years.

Example:

The three shaded years are your three highest years of earnings. Your final average monthly earnings is based on the earnings and service in those three years.

However, if you earn more during some of your part-time years than you did during your full-time years, your final average monthly earnings will be higher to reflect this.

The three shaded years are your three highest years of earnings. Your final average monthly earnings is based on the earnings and service in those three years.

RETIRING EARLY AND YOUR AGE REDUCTION FACTOR

There is no formula benefit age reduction if you are 65 or older as a general, teacher or educational support employee. If you are an elected or state executive employee, there is no formula age reduction at age 62 or older.

Employees in the general, teacher, educational support, elected and state executive occupation categories with at least 30 years of creditable service receive unreduced formula benefits at age 57 or older. Creditable service accrues more slowly if you work part-time, so it takes longer to earn the 30 years you need for an unreduced formula benefit. The age reduction diminishes if you are under 65, (62 for elected and executive), even if you have less than 30 years of creditable service. See the age reduction chart which follows.

MILITARY SERVICE

One year of active military service credit may be granted for each five years of non-military creditable service, up to a maximum of four years of military credit for active duty in the U.S. armed forces before 1974. Since you accrue creditable service at a slower rate when working part-time, you may not be eligible for as many years of military service credit if you work part-time.

DISABILITY BENEFITS

WRS Disability Benefits

Unless your disability is work-related, to be eligible for WRS disability benefits you must have earned a total of at least five years of service in the seven-year period preceding application OR have at least one-half year of creditable service in each of five in the last seven years. We calculate your WRS disability the same as regular retirement benefits except for the amount of creditable service used in the calculation. For disability purposes, the creditable service will also include assumed service for those years between the date of your disability and the date when you will reach the "normal retirement age" (NRA) for your employment category. Generally, if your creditable service is based on part-time employment the assumed service projected to your NRA will be pro-rated based on part-time employment.

If you earn less than one-half year of creditable service each year during the seven-year period before you apply for disability benefits, you may not qualify for a disability benefit.

Long-Term Disability Insurance

Long-Term Disability Insurance (LTDI) benefits are not calculated based on your years of creditable service. Instead, we calculate monthly LTDI benefits as a percentage of your final average salary. However, to qualify for LTDI benefits you must have at least 0.33 years of creditable service in five of the last seven years. If you do not earn 0.33 year of service in at least five of the last seven years, you may not qualify for an LTDI benefit.

LIFE INSURANCE BENEFITS

The amount of your Wisconsin Public Employers Group Life Insurance coverage is based on your highest reported salary.

The current amount of your coverage will not be automatically reduced if your annual earnings decrease because you reduce to part-time employment; however, you may elect to take a reduced amount based on your lower earnings. The state's contribution per $1,000 of insurance will remain constant, so if you elect reduced coverage, you will reduce the state's contribution toward premiums as well as your own.

In order to continue life insurance coverage on retirement before your minimum retirement age (55 for all categories except protective, which is age 50), you must meet one of these conditions:

1. Your years of creditable service before 1990 plus your years of insurance coverage after 1989 must total at least 20 years,
   OR
2. You must have worked at least 20 years for the same employer from which you retire.

If your eligibility to continue coverage depends upon the first of these alternatives, working part-time will result in your accruing 20 years of service at a slower rate. However, working part-time will not affect your eligibility to continue coverage under the second alternative. A year of part-time employment with your employer still counts as a year, even if you did not earn a year of creditable service in that year.

If you become disabled while you are employed, even though you may not be eligible for a disability benefit because of reduced creditable service (see DISABILITY BENEFITS), you may still be eligible for life insurance without paying further premiums ("waiver of premium") as long as you submit annual medical information to verify your continued total disability. Your employer must file a "Waiver of Premium" for you.

HEALTH BENEFITS (State Employees Only)

If your part-time covered WRS employment is less than 50%, the state will contribute only 50% of what it pays toward the premium of a full-time employee. If your part-time employment is 50% or more, there is no reduction in the state's contribution. Total premium costs remain the same regardless of your employment status (full-time or part-time).

If you work part-time you will accumulate sick leave more slowly, resulting in fewer hours being available for illness and fewer hours accumulated at retirement to convert into credits to pay your health insurance premiums. When you retire your hours of sick leave at retirement are converted to credits to pay for post-retirement health insurance premiums. Your hourly base rate of pay at the time you retire is used to calculate your sick leave balance. Therefore, your hourly pay and the number of hours of sick leave you accrue are important for this purpose.

Since you are accruing creditable service at a lower rate, it is also more likely that you will not have 20 years of creditable service when you retire. If so, you must take an immediate annuity (an annuity that begins no more than 30 days after you terminate employment) in order to continue your health coverage and use your accumulated sick leave credits. If you are not eligible for an immediate annuity, but you have 20 years of creditable service and remain a WRS participant (which means you must not close your account by taking a separation benefit), you may continue group health insurance.

HEALTH BENEFITS (Local Government Employees)

If you participate in the Wisconsin Public Employers Group Health Insurance program, the amount of premium paid by your employer may change. If you work half-time or more, the program requires that employers pay between 50% and 105% of your premium for the lowest-cost plan in your employer's service area. If you work less than half-time, your employer must pay at least 25% of the lowest-cost premium. Within these parameters, employers are free to contribute any amount they choose.

INCOME CONTINUATION INSURANCE (State Employees Only)

Part-time employment results in lower benefit payments if you become disabled. Benefits are based on your monthly earnings before you become disabled, which will normally be lower if you work part-time.

If you work part-time, you will accumulate sick leave more slowly. Consequently, it will take you longer to reach the permanent premium plateaus (Category 4, 5 and 6). Permanent plateaus mean that once an employee reaches certain levels of sick leave accumulation, future premiums are determined using that individual category even though later use of sick leave may cause the total amount of sick leave to drop below that plateau. Only Category 3 permits proration of sick leave accruals for part-time employment. The state begins to pay a percentage of the premiums for you beginning with Category 3. Please refer to the Income Continuation Insurance booklet for more detailed information.

INCOME CONTINUATION INSURANCE (Local Government Employees)

Part-time employment will result in lower premiums and a lower benefit level, since both are based on your average monthly earnings. When there is a change in the percentage of employment of a position, estimated average monthly earnings is revised.