While the financial crisis facing the Public School Employee’s Retirement System (PSERS) is well-known, with more and more retired school employees returning to school employment, another danger has been highlighted by the Commonwealth Court’s recent decision in Baillie v. Public School Employees’ Retirement Board. The Court upheld a PSERS decision that a retired IU Director return almost $80,000 in annuity payments. The Court agreed with PSERS that the employee was not entitled to receive an annuity after rehire because the situation did not qualify as an emergency for purposes of the Retirement Code and because he was never truly separated from service.
While Section 8346(b) of the Retirement Code authorizes public schools to employ a retired school employee who is collecting a retirement annuity when there is an emergency, the Court held that an emergency is limited to the following circumstances: 1) when an emergency creates an increase in the work load such that service to the public is seriously impaired, or 2) when there is a shortage of appropriate personnel. In Baillie, neither circumstance existed.
Further, a key aspect of the case involved the issue of whether Baillie was actually separated from service with the IU. The Retirement Code states that a member of the retirement system is entitled to receive an annuity “upon termination of service.” The Court concluded that Baillie was never separated from service with the IU. He finished his work week on one Friday and returned on Monday, the next business day. Therefore, he continued to work without interruption. Consequently, Baillie never qualified as an annuitant and was not eligible to be hired on an emergency basis.
The Baillie decision reinforces a couple of basic principles. First, an employee must actually be separated from service in order to qualify as an annuitant under the Retirement Code. Second, retired school employees may only return to service without a loss of annuity if there is an “emergency” or “shortage of personnel.” This requirement is also highlighted in the PSERS Retired Member Handbook. The Handbook recognizes that while the employer makes the decision whether these requirements have been satisfied, “employers are expected to first make a ‘good faith’ effort to secure non-retired school personnel.” Ultimately, the Handbook then cautions, as the Baillie court confirmed, that PSERS “reserves the right to review an employer’s determination that a qualifying emergency or shortage exists.” If your School District is considering hiring a retired school employee, be certain that these criteria have been met or else you may be placing the retired employee in danger.