The Legislature's committee on retirement endorsed a bill Monday that would eliminate the one-month waiting period between retirement and reemployment for Arkansas Teacher Retirement System members with at least 38 years of service.
The Joint Committee on Public Retirement and Social Security Programs also recommended legislative approval of a bill that would specify that Tier 2 members of the Arkansas State Police Retirement System are eligible for service credit from a reciprocal retirement system in determining their eligibility for the Tier 2 deferred retirement plan.
Also, the committee recommended a bill that would open the door for the Arkansas Public Employees Retirement System to collect debts and overpayments from state income tax refunds.
State law requires that Teacher Retirement System members who do not have at least 38 years' service and are under age 65 have a six-month separation period once they retire before they can return to work. The law also requires a one-month separation for a member who has 38 years of service but is younger than 65.
Senate Bill 174 by Sen. Larry Teague, D-Nashville, would modify the definition of normal retirement age to be 65 years with five years of service or age 60 with total service of at least 38 years, and it would allow members reaching normal retirement age to begin receiving their retirement benefits, even if there is no termination of employment, said committee actuary Jody Carreiro.
System Director Clint Rhoden said the bill's primary purpose is to eliminate the one-month separation period between retirement and reemployment for a member with at least 38 years of service.
"The problem with that is, as we really dive into the IRS regulations, is that small separation period actually could encourage agreements between an employee and an employer to come back to work after you have been separated, and ... we don't want to have an agreement; the IRS prohibits that," he said.
Rhoden said, "Arguably, we could have been doing it wrong.
"It is a very high evidentiary standard that you have to prove that there was an agreement," he said. "This just makes it a lot more clearer that ATRS can counsel our members in a more definitive way and not have any kind of encouragement to have an agreement after one-month separation."
He said the bill could affect fewer than 100 members a year.
STATE POLICE PLAN
Rep. Les Warren, R-Hot Springs, said his House Bill 1350 would align state law for the Arkansas State Police Retirement System's Tier 2 deferred retirement plan with the system's administrative practices.
System members hired before April 3, 1997, belong to the system's Tier 1 retirement plan, while those hired on or after that date belong to the Tier 2 retirement plan.
"The agency interpretation of the current law allows a Tier 2 member to use reciprocal service to enter the Tier 2 [deferred retirement plan]," Warren said.
The system's Tier 2 members have about a year of reciprocal service per member based on the available information, and the bill would mean on average that they could enter the deferred retirement plan a year earlier than they could have previously, Carreiro said.
Warren said that "this was a very big issue for state police" when the Legislature's public retirement committee held meetings across the state in the fall of 2019.
"We got hit over and over [with], 'We are supposed to be able to use reciprocal service when it comes to making us eligible'" for the deferred retirement plan, he said.
The committee also endorsed House Bill 1352 by Warren, which would change state law by adding the Arkansas Public Employees Retirement System as a claimant agency eligible to offset a taxpayer's state income tax refund to satisfy a debt owed to the system from an overpayment of the monthly retirement benefit or lump sum from the system.
For fiscal 2020, which ended June 30, system Director Duncan Baird said nearly 50 members were paid about $147,000 after their deaths and before the system was notified, and the system made an error in paying 11 retired members double cost-of-living adjustments totaling $10,000 to $11,000.