The practice of bringing retired employees back to work for the state can seem like a good way to retain key expertise. But there are pitfalls. The IRS requires that there be a reasonable break in service before
a former employee returns to work. The state is considered a single employer; therefore, an employee who retires from one agency and goes to work for another agency is subject to the restrictions as well as one who returns to his previous agency. Here
are some guidelines developed by the Virginia Retirement System to help agencies comply with the IRS requirements:
- The person must be off the payroll for some period of time; a minimum of 30 days is suggested.
- There is no pre-arranged commitment between the employer and the individual.
- Some or all duties of the new job are different from the duties the person performed before retirement.
- The employment period is not open-ended; the person and employment situation should be re-evaluated every six months.
Failure to show a good-faith effort to comply with these guidelines can result in stiff penalties for the employer.