MONTPELIER, Vt. (AP) – Some veteran educators in Vermont might feel a pinch on their wallets in July.
A new rule taking effect next summer will bar educators from retiring, collecting their pensions, and then repackaging themselves as consultants.
Critics say the veteran educators are returning to work full time in Vermont school districts without paying into the state teacher retirement system. The practice is now legal, but has drawn opposition from those who fear the trend could deplete the retirement fund.
“By next year this practice will not be something that you’ll see very often in Vermont,” state Treasurer Jeb Spaulding said.
Though only an estimated 10 people are passing through the independent contractor loophole – mostly retired superintendents and principals – Spaulding and others want it closed before more people join them.
The worry is that if retirees drawing pensions take up jobs that would normally be held by people who pay into the system, it will eventually dent Vermont’s $1.1 billion teacher retirement fund.
“It’s not bad if it’s only 10 people, but if every teacher who retired did that, then the system would be in trouble,” said Joe Mackey, a teacher at the Essex Technical Center. He serves as chairman of the Teachers Retirement Board.
Defenders of the practice say it keeps administrators with valuable experience in the schools and does so at no additional cost to local districts.
The retirement board voted to make the new policy effective July 1. It requires all pension beneficiaries working in Vermont public schools to obtain the blessing of the Internal Revenue Service if they want to be considered independent contractors.
Starting next fiscal year they must acquire a Determination of Worker Status Report form from the IRS that specifies whether they meet contractor status or not.
Those who are defined as employees rather than contractors will be subject to pension fund income caps. These specify that educators who draw a pension and want to return to work as Vermont public school employees can earn only 60 percent of average teacher salary — a cap set at $24,100 this year.
“We just want to make sure that these retirees that are going back into positions that are identical to the ones they held prior to retirement … really do meet the independent contractor criteria,” said Cynthia Webster, director of retirement operations at the Vermont State Treasurer’s Office.
People who have been collecting pensions and independent contractor pay agree that the new rule could curtail that.
“I think it’s going to be very difficult to meet the standard that they have set,” said Burlington schools superintendent Lyman Amsden. “For all intents and purposes it will probably eliminate most everybody. The real test will be probably how the IRS interprets it.”
AP-ES-10-05-03 1511EDT
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