This Fact Sheet describes the requirements and limitations that apply when a TRS member decides to return to work with a TRS employer in a position reportable to the retirement system. To ensure compliance with these requirements, it is important for both members and employers to understand how active members become retired members and why there must be clear separation between these two phases.
Why is this important? Montana law requires TRS to be a tax-qualified pension plan, which means TRS must comply with all qualification standards set forth in the Internal Revenue Code (IRC). One such standard prohibits TRS from paying retirement benefits to a member who has not terminated employment in all positions covered by the retirement system. TRS must verify the member has had a bona fide separation from service – i.e., the employer-employee relationship has been completely severed – before paying any benefits.
Retirees who wish to resume employment in a position reportable to the retirement system while continuing to receive their monthly retirement benefit, and TRS employers who wish to hire them, must ensure that all steps have been properly completed. Failure to comply with all requirements and limitations described in this Fact Sheet could result in serious financial consequences for both the retiree and the TRS employer.
How does an active member become a retired member of TRS?
Members who are vested and eligible for a future TRS retirement benefit must terminate all TRS-reportable employment to apply for and receive that benefit. A common question is whether members can resign their primary position (e.g., classroom teaching) and continue performing some duties (e.g., coaching or teaching driver’s education) while applying for a retirement benefit. This is not allowed. A member who has not terminated all employment in all positions reportable to TRS is not eligible to receive a retirement benefit.
When a member applies for retirement, TRS must certify the member’s termination date (i.e., the last date on which the member provided service) with their pre-retirement employer. For contract employees, the termination date may be prior to the contract end date. If the member worked in multiple TRS-reportable positions with one or more TRS employers, the member’s termination date will be the last certified date of termination of employment.
The member’s status with TRS does not change from “active member” to “retired member” upon terminating employment and applying for a retirement benefit. The member attains retired member status when they have received the first monthly benefit. (A separate TRS Fact Sheet, Terminating Employment and Retiring with TRS, covers the retirement process in more detail, including information about the timing of benefit payments.)
When can a retired member return to work in a TRS-reportable position?
To avoid ambiguity as to whether there has been a bona fide separation from service, many public retirement systems across the U.S., including TRS, require newly retired members to wait a specified number of days before resuming any kind of employment in any position reportable to the retirement system.
This is called a break-in-service requirement and it applies to every recent TRS retiree, regardless of whether the retiree will provide service as an actual employee of a TRS employer, as an employee of a third party, as an independent contractor, or as an unpaid volunteer, unless a documented exception exists (see Exceptions to the break-in-service requirement, below).
TRS law requires a break in service of 150 or 120 calendar days, as follows:
The required break in service begins on the day following the member’s last certified date of termination of employment and ends on the 151st or 121st calendar day, as applicable. After processing the member’s application for retirement, TRS will notify the member of the exact date on which the required break in service will end. The retired member also may view that date in My TRS, the secure online member portal.
Why not 90 days? TRS is often asked why the required break in service cannot be shorter, such as 90 days. In Montana’s public school system, most TRS members remain employed over the summer break. If a teacher applies for retirement at the end of the school year and resumes employment 90 days later as a retiree, have they actually terminated employment and retired? Remember, TRS is prohibited from paying retirement benefits if it is not clear whether the employment relationship has been severed.
Exceptions to the break-in-service requirement
Must TRS be notified when a retired member goes back to work on a paid or volunteer basis?
Yes, if that retired member will provide service to a TRS employer. Both the retired member and employer must complete and submit TRS Form 146, Retired Member’s and Employer’s Notice of Postretirement Employment.
The TRS employer must report the retired member’s earnings to TRS each month.
Is there a limit on how much the retired member can earn?
Yes. A retired TRS member who returns to work for a TRS employer in a position reportable to the retirement system generally is subject to an annual earnings limitation. The maximum allowable earnings is the highest amount the retired member may earn in the current fiscal year without affecting their monthly TRS benefit.
If the member works in multiple TRS positions or works concurrently in a TRS and a PERS position with the same employer, all earnings count toward the annual earnings limit.
Earnings include wages or other compensation paid to or on behalf of the retiree, as well as the value of certain benefits, including payments deferred to a later year.* Earnings do not include payroll taxes or health insurance premiums paid by the employer, the value of any housing provided by the employer, travel expenses for which the employer reimburses the member, or de minimis fringe benefits as defined in federal law.
Effective July 1, 2023, the maximum allowable earnings amount is the greater of:
What happens if the working retiree’s earnings exceed the annual limit?
Important information about PERS or MUS employment
Working in positions covered by the Public Employees’ Retirement System (PERS)
Public schools in Montana have many non-instructional positions reportable to PERS, including office staff, kitchen and custodial staff, bus drivers and others. Depending on the situation, a retired TRS member may be able to work in such a position without restriction. Read the following conditions carefully:
Working for the Montana University System (MUS)
If a TRS retiree is hired by the Montana University System (MUS) – whether as an employee or an independent contractor - that member is subject to all TRS requirements described in the Fact Sheet, including the prohibition on prearranged agreements, the required break in service, and the annual earnings limitation.
Retired TRS members who never worked for the MUS as active members have the option to join the MUS Retirement Plan; however, doing so will result in immediate suspension of their TRS retirement benefit until such time as they terminate employment and apply for reinstatement of their suspended TRS benefit.
Consequences of noncompliance
Failure to comply with any TRS requirement before or after the member begins receiving a monthly retirement benefit could mean that TRS has paid benefits the retiree was not entitled to receive. This may occur, for example, because the TRS employer allowed a newly retired member to return to work before completing the required break in service or because TRS was not notified of the retired member’s employment.
If TRS has paid retirement benefits that the member was not entitled to receive, TRS must return the member to active member status and the member must repay all overpaid benefits to TRS, plus interest.
Even if an employer believes the work to be performed or the services to be provided are not reportable to TRS, it is important to notify TRS as instructed above anytime the TRS employer hires a retired TRS member to fill a paid or volunteer position.
*Footnote: Call TRS with questions about whether specific payments, expenses, or benefits count toward the annual earnings limit.
Fact sheet updated: October 10, 2024
