Many employers, especially in more difficult economic times, enjoy the advantages of contracting with retired workers or even rehiring them. If you are such an employer, you get years of proven expertise, accumulated knowledge and valuable mentors for younger employees, all at a good cost. For the retired employees, advantages include more financial stability, socialization and mental challenges. However, one stumbling block to these employees saying “yes” to the question of coming back or working again is concern about what happens to their pensions. For example, do they still get to keep their pensions if they work again? The answer is generally yes; officially retired folks can get back to work with no effect on their pensions. However, that is not always the case with Social Security benefits. Here’s what you need to know about the pensions and Social Security benefits of retired workers who start working again.
If Working With the Same Employer Again
If you are considering rehiring someone who used to work for your company but who has officially retired, you must do so on part-time or contractor grounds. No more full-time 40-hour work weeks.
If Working With a Different Employer
If you represent a company wanting to hire someone who has never worked for the business before, that person can work full time and not have it affect his or her pension. Such situations are especially common when employees at companies other than yours are provided with inducements for early retirement, for example, if the companies need to cut costs or trim their work staff. It does not matter how much your formerly-retired employee will earn; a pension from his or her prior employer will not be affected.
If Collecting Social Security Benefits
When a prospective employee who is retired has already started collecting Social Security but is not at full retirement age, it’s possible that his or her benefits will be decreased. This occurs only if the employee makes more than a certain amount of money yearly. Someone born from January 2, 1943 through January 1, 1955, has a full retirement age of 66. In the year 2016, the earned-income limit is $15,720, which translates to $1,310 for each month. Benefits decrease by $1 for every $2 earned over the limit. However, if someone is poised to reach full retirement age during 2016, $1 of benefits is deducted for each $3 earned above $41,880 until the month in which the person reaches full retirement age.
If the prospective employee has already reached full retirement age when he or she starts working for you, he or she does not have to worry about Social Security benefits being affected.
Offering Budgeting Assistance
To recruit retired employees, it’s always helpful to have a document outlining any possible considerations for these employees. One such issue is whether a retired person’s pension has been paid in a lump sum versus on a monthly basis. Use examples from both situations to help these folks figure out how many hours a week or a month they would like to work for your company.
Recommend that these prospective employees use the calculator on the Social Security website to see how their benefits might be affected if they go to work for you. It’s possible that Social Security would not reduce their checks by the same amount each month, instead opting to hold back several months’ worth of checks to make up the deficit.
Another interesting thing you might want to note on recruiting documents is that if a retired person begins working again and loses the job, he or she can collect unemployment again as long as he or she meets the criteria to collect these benefits. So, he or she could collect both unemployment benefits and Social Security at the same time.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.