June 09, 2008
Retired, but not really
Despite a spate of recent news reports about "double dipping," (here, here and here) state lawmakers want to make it easier for government retirees to collect both pensions and paychecks.
Bills further easing limits on post-retirement income--including one with an estimated state and local fiscal impact of $100 million a year -- could be among many likely to crowd the Legislature's agenda during eight session days before its scheduled adjournment on June 23.
There are already a number of ways that state and local government employees can retire and then return to work--either to their old jobs or another job in state or local government. For those over 65, there's no limit on post-retirement earnings.
Retirees under 65 have three options for returning to work for state or local government after beginning to collect a pension:
1.) Get a so-called Section 211 waiver from an employer stating that, as set forth in law, "there are not readily available for recruitment persons qualified to perform the duties of such position." Employees with Section 211 waivers can collect full salaries and full pensions.
2.) Return to work as private consultant or independent contractor for the state. (UPDATE: This option is available only to those hired before May 31, 1973.)
3.) Earn up to $30,000 a year from a government employer without a Section 211 waiver, which is allowed under Section 211 of the state retirement and social security laws.
The Organization of Management Confidential Employees and state public employee unions are pushing to increase the $30,000 retiree salary cap. One bill would raise the cap to $32,500. Another ups the cap to $40,000. In the Assembly, the two bills are in the Ways and Means Committee. In the Senate, they're in the Civil Service Committee.
Sponsors justify raising the cap saying it would allow the state and local governments to "hire back experienced employees at a dramatically reduced cost and without benefits."
The salary cap was raised to $30,000 from $27,500 in 2006. In 1996, the cap was $12,500.
The $30,000 threshold encourages some employees to retire and collect their pensions, knowing they could earn an additional $30,000 without penalty. Actually, they may end up earning more than before they retired. For example, a 55-year-old state worker who retires from a $70,000-a-year job after 30 years can collect a $42,000 pension plus a $30,000 post-retirement salary, a total of $72,000. Since the pension is exempt from federal payroll taxes and state income tax, it pays more than a job paying the same amount in wages. (UPDATE: Federal payroll taxes refer to Social Security and Medicare taxes, not federal income taxes.)
Both bills acknowledge the higher earnings cap would motivate some government workers to turn in retirement papers. The bill raising the threshold to $40,000 states:
...we expect that a number of members will retire earlier than they otherwise would have due to the expectation of collecting both a pension and the salary they were receiving before they retired. Since almost half of retirement eligible members are receiving less than $40,000 in annual salary, we expect that there could be annual employer costs of up to $100 million. Insofar as this bill would affect the New York State and Local Police and Fire Retirement System, there would be negligible additional annual costs.
The bill raising the cap to $32,500 contains similar language, but does not calculate a cost to taxpayers.
UPDATE: The Albany Times Union today weighs in with an editorial about school superintendents who retire and then are named as interim superintendents at another school district or their former school district. It points out that the practice is legal and not widespread.
A retired superintendent who serves on an interim basis is often in a better position to make the tough, unpopular decisions that a permanent administrator might shy away from for fear of angering the school board and jeopardizing his or her job. This independence helps put a district on a firmer fiscal footing...
The Council of School Superintendents says that fewer than 40 interim superintendents are now working, at least half of them 65 or older. The numbers do not suggest a rampant trend toward double-dipping.
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