For a number of years, school districts have hired, or in many cases "rehired," employees who had previously retired from employment with a school district or some other state entity and begun receiving retirement benefits from the State Retirement Fund. Normally, such retired employees were prohibited from accepting employment with a district, or any other state employer, unless they were willing to forego their retirement benefits. Alternatively, retired employees could return to employment if their income from the post-retirement employment did not exceed an amount set by the legislature. To overcome these limitations, the retired employee could form a corporation and became an employee of the corporation. The school district then, in effect, hired the corporation to provide the services of the retired individual. In 1998, however, the legislature saw fit to limit this practice by passing a legislative proviso, attached to the budget bill, which made it possible to hire retired individuals through corporations for less than one year only, and then only if there was an emergency situation, such as the sudden death of an administrator, or the district could show a special need and a cost savings.
This practice was further limited during the summer of 1999, through another legislative proviso attached to the budget bill. The most significant impact of the 1999 proviso is the prohibition on hiring retirees through corporations for any positions which are required by the Defined Minimum Program or which are listed as permanent positions on the Professional Staff Listing submitted to the State Department annually. An exception to this prohibition was created for temporary instructional positions in the teaching areas of special education, art, music, and other critical shortage fields as defined by the State Board of Education for the 1999-2000 school year. Currently, these critical shortage fields include, in addition to Art, Music, and Special Education, the areas of Business Education, English/Language Arts, Family and Consumer Science (Home Economics), Foreign Languages (French, German, Latin and Spanish), Industrial Technology, Library Science (Media), Mathematics, and Science. The proviso also states that individuals may be hired through corporations for temporary positions for grant writing and testing. Although the term "temporary positions" as used in the proviso is not defined, the State Department of Education has taken the position that the term should be interpreted to mean positions held for less than a full fiscal year. It also should be noted that districts are still free to hire consultants who are incorporated for special projects or temporary positions not included on the district's Professional Staff Listing. Districts which hire retired individuals through corporations in violation of the proviso are subject to having their Education Finance Act and Education Improvement Act allocations reduced by the amount paid to the corporation.
The 1999 proviso also creates an exception that allows retired teachers to return to the classroom but continue to receive their full retirement benefits, without having to incorporate or meet the exceptions described above. This option is limited to teachers who are certified in one of the critical need subject areas established by the State Board, or who are willing to teach in a critical geographic need area, also defined by the State Board of Education. For the 1999-2000 school year, the geographic need school districts include Allendale, Bamburg Two, Calhoun, Clarendon One, Clarendon Two, Florence Three, Florence Four, Greenwood 52, Hampton Two, Jasper, Marion Three, McCormick, Richland One, Saluda, and Sumter 17. Before hiring retired teachers to teach in critical need areas pursuant to the proviso, districts must be able to certify to the State Department of Education that they have made every effort to recruit non-retired teachers for vacancies and have continued the search until at least July 15th of each school year. If a retired teacher is hired after July 15 to teach in a critical need subject or geographic area, the term of employment is limited to the remainder of the current academic year. Districts are under no obligation to issue a continuing contract to retired teachers hired under these circumstances and issuance of a letter of agreement, specifying the limited term of the employment, may be preferable. Because the retired teacher can only be hired for a limited term after July 15th of each year, districts must continue their search to fill the position on a permanent basis. Failure to notify the State Department that the recruitment efforts have been made, and that retired teachers subsequently have been hired, could result in the district being required to reimburse the Retirement System for the retirement benefits which the system has paid to the retired teacher.
Legislation was also passed to address the earnings cap for retirees who return to work for a district or other state employer who wish to continue receiving their benefits and who do not meet any of the exceptions outlined in the proviso. The cap has now been raised to $25,000, meaning that any retired individual who wishes to return to work could accept a position which pays less than $25,000 annually, or could hold the position for a limited period of time up to the point where the individual has been paid $25,000 in any one fiscal year. If a retired employee holds a position which pays less than $25,000 for more than one year, certain other provisions of the state retirement laws may come into play. Once again, however, the district must notify the Retirement System that a retired individual has been hired, or the district will be required to reimburse the Retirement System for all retirement benefits paid to the retired individual while that individual is receiving salary and retirement benefits.
If a district hires a retired employee, either to work in a critical need area or in a position which will pay less then $25,000, the district must pay to the State Retirement System the amount of the employer contribution the district would have had to pay if a non-retired person was hired to fill the position. Presumably, the purpose of this provision is to assure that the State Retirement System does not suffer the loss of incoming funds as a result of a non-contributing individual being hired.
The 1999 retirement proviso raises a number of issues for school districts, particularly those which have had difficulty finding qualified candidates for administrative positions. Districts will no longer be able to employ retired administrators to fill regular administrative positions, unless the administrator is willing to work an entire year for $25,000, or for a limited period of time, again earning no more than $25,000. To soften this blow, the Legislature did see fit to increase the earnings cap for working retirees. As a result, districts have the option of hiring retired administrators for limited periods of time while a search for a permanent employee is initiated or continued. In contrast, districts now have greater flexibility to address the current teacher shortage by hiring retired teachers either in critical need subject areas or geographic areas. Whatever the situation may be, if retired individuals are hired, certain notification, contribution, and earning limitation requirements must be followed.