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March 18, 2013 — Following recent discussions and consultations with state retirement officials, the University of Wyoming has made adjustments to be in full compliance with Internal Revenue Service (IRS) regulations regarding the rehiring of retired employees.
To be considered for re-employment, a retiree must first have a bona fide break in service as defined by the Internal Revenue Code (IRC).
“Employees who terminate their employment and desire to withdraw or roll over funds from retirement plans must first have a bona fide break in service,” says Eric Goldenstein, employee benefits manager with UW Human Resources. “This means that at termination, there cannot be a pre-existing arrangement to return to work or any promise of future employment with the University of Wyoming.”
Additionally, Wyoming Retirement System (WRS) participants must have at least a 30-day break in service per Wyoming statute before being rehired into a benefited position. Faculty members who resign from their positions, but continue to work on grant-funded projects and are paid through the UW Payroll Office, are considered to be employees without a bona fide break in service and cannot access retirement funds.
Ramifications of Non-Compliance
According to the UW Human Resources Office, each of the retirement plans sponsored by UW is subject to qualification by the IRS. This qualification is predicated upon compliance with the IRC and other federal law. Lack of compliance with these federal mandates threatens the qualified tax status of the plans.
“Failure to comply with the state statute, hiring a retiree receiving a WRS benefit with less than a 30-day break in service, will result in immediate cancellation of the retiree’s benefit and reinstatement as a contributing member of WRS,” Goldenstein explains.
Richard DelaCastro, UW’s director of Human Resources, offers the following guidance involving rehiring of retired employees:
“It is imperative that no verbal or written promises of future employment be made prior to an employee’s retirement. To avoid a claim that such a promise was made, a competitive process to fill an open position should be considered. If the appropriate break in service is not possible, the retiree either cannot be rehired or must delay receiving retirement benefits.”