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Employer Reporting Requirements: Phased Retirement Option


 

The Phased Retirement Option (PRO) is a tool that allows employers to meet their workforce needs while employees transition into full retirement.

The PRO permits an active member of the General Plan, who is at least age 62, to receive a PERA retirement annuity without a formal termination of employment. However, members must substantially reduce their work hours while participating in the PRO agreement. The governing body of the governmental entity has the discretion to determine if it will offer the PRO program to an employee as well as the duration of the PRO agreement(s). Any earnings under the PRO position are not subject to the post-retirement annual earnings limits. The PRO program expires June 30, 2019.

Eligibility Requirements

In order to participate under Phased Retirement, the employee must meet the following eligibility and PRO requirements:

Eligibility:

  • Active Member of the General Plan (Coordinated or Basic)
  • Age 62 or older
  • Immediately eligible for a retirement annuity from the General Plan
  • Worked at least 1,044 hours each of the five preceding years
  • Not eligible for the state employee Post-Retirement Option program under Minnesota Statutes § 43A.346

Members not eligible for the PRO include:

  • MERF Members
  • Elected Officials
  • State employees covered by PERA
  • Members of any plan other than the General Plan
  • Current PERA Retirees

 

Phased Retirement Requirements:

  • The employee and employer must enter into a PRO agreement before the employee terminates employment and PERA must receive the PRO agreement before the PRO begins.
  • PRO agreements can be up to one year in length and may be renewed up to five times at the discretion of the employer.
  • The employee must reduce hours by at least 25% and not exceed 1,044 hours per PRO agreement one year period.
  • The employee and employer no longer contribute to PERA.

The Phased Retirement Process

Initiating the Phased Retirement Agreement:

Once an agreement has been made between the employer and the employee to participate in the PRO, the Phased Retirement Agreement form must be completed instead of the Verification of Termination form with the retirement application process. Please refer to our Retirement Tool Kit for additional information on how to apply for a PERA monthly retirement annuity. The PRO agreement form consists of three components: the employee should complete and sign Part A and C while the employer completes and signs Part B.  Either the employer or the employee may submit the completed form to PERA. However, the agreement must be entered into and received by PERA before the start of employment under the phased retirement program.  The employer may not establish a PRO agreement with someone who is already collecting a benefit from PERA.

 

During the Phased Retirement Agreement:

Employers that have a PRO agreement stop making contributions to PERA on the day the employee’s General Plan (Coordinated or Basic) membership is discontinued. Employers must, however, enroll employees participating in the PRO in PERA’s Exempt Plan. The Exempt Plan was established as a way for PERA to receive earnings information from employers on re-employed benefit recipients who are under full Social Security retirement age. Therefore, the earnings of these individuals must be reported on the Salary Deduction Report (SDR).

To report wages of the employee/retiree working under a PRO agreement, include the individual’s name and Social Security number on the SDR under the plan type of Exempt. You may include PRO participants on the SDRs you regularly submit to PERA, whether they are demographic data files, web reports created through the Employer Reporting and Information System (ERIS), or paper SDRs. Please include earnings data on these employees. No employee or employer contributions are payable to the retirement plan on the earnings of the PRO position.

If the PRO is renewed, the employer and employee must complete and submit another Phased Retirement Agreement form to PERA prior to the PRO renewal date.

 

At the Conclusion of the Phased Retirement Agreement: 

Employers must advise PERA once the PRO agreement has concluded and/or when the employee terminates public service. Please complete and submit the Employment Verification Status form to PERA.  The employee is not required to terminate public employment associated with the PRO agreement or any other public employment at the end of the PRO Agreement.

Please Note: If the employee continues employment after the PRO agreement ends and the employee is:

  • Under full Social Security age: the employee will be under the post-retirement annual earnings limits
  • Over full Social Security age: no post-retirement annual earnings limits

 

The PRO program expires June 30, 2019:

The law allows for anyone already working under the terms of a PRO agreement on or before June 30, 2019, to continue working under the PRO for a maximum of five years. It does not allow for new participants to enter the program on or after July 1, 2019.