Ask Jack: Is there a stipulation on going back to work after retirement in a public school setting?
Yes, there are certain restrictions for working after retirement in a public school setting. If you return to work after service retirement in a CalSTRS-covered position, including substitute teaching, as an employee of a public school system, an independent contractor or an employee of a third party, there are restrictions under state and federal law that apply to you.
- Work in a classified position except, under certain circumstances, as a teacher’s aide.
- Earn any pay without affecting your retirement benefit if you return to work before the 180-calendar day separation-from-service requirement.
- Earn more than the annual postretirement earnings limit without affecting your CalSTRS retirement benefit.
In addition, you cannot keep the additional service credit you received under the CalSTRS Retirement Incentive Program, if you take any job within five years of retirement with the employer that offered the incentive.
Separation from Service
The separation-from-service requirement, also known as the zero-dollar earnings limit, applies to all members who retire and return to work in a CalSTRS-covered position within the public school system as an employee, an independent contractor or an employee of a third party. Your retirement benefit will be reduced dollar for dollar by the amount that you earn in CalSTRS-covered employment, including employer contributions to tax-sheltered annuities and other tax-favored products, during the first 180 calendar days following your most recent retirement effective date, up to your benefit amount payable during that period.
There is a very narrow exemption from the separation-from-service requirement if you have reached normal retirement age, your appointment is required to fill a critically needed position, the governing body of your employer approved your appointment by resolution at a public meeting, you did not receive any financial inducement to retire, and your termination of service was not the cause of the need to acquire your services.
Your employer must submit the required documentation to CalSTRS substantiating your eligibility for the exemption. CalSTRS must receive an exemption request and required documentation before you can begin working.
This requirement and narrow exemption also apply to Cash Balance Benefit participants who receive their retirement benefit as an annuity benefit. For Cash Balance Benefit participants who receive their retirement benefit as a lump-sum payment, their benefit payment will not be payable until 180 calendar days after the date they terminated employment.
Postretirement Earnings Limit
If you return to work after meeting the separation-from-service requirement in a CalSTRS-covered position as an employee of a public school system, an independent contractor, or an employee of a third party, you can earn up to the annual postretirement earnings limit without affecting your benefit unless you qualify for a very narrow exemption or work for certain third-party employers under two conditions.
The earnings limit for 2015–16 is $40,321. The Teachers’ Retirement Board adjusts the earnings limit annually. If your earnings from CalSTRS-covered employment, including employer contributions to tax-sheltered annuities and other tax-favored products, exceed the postretirement earnings limit, CalSTRS will withhold all of your gross monthly retirement benefits—both your monthly retirement and Defined Benefit Supplement benefits—until we collect your excess earnings in full, up to the amount of your annual retirement benefit minus any previous reduction due to the zero-dollar earnings limit.
For example, if you return to CalSTRS-covered work in the 2015–16 fiscal year and earn $50,000, you will have exceeded the earnings limit of $40,321 by $9,679. CalSTRS will withhold $9,679 from your benefit payments that year, if your annual retirement benefit is $9,679 or more.