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Bill would increase earning cap for state retirees returning to work

During recent funding request presentations to lawmakers, leaders from multiple departments said they don’t have enough staff. From prisons to preschool programs,  agencies are struggling to hire and retain needed workers.

A pre-filed bill from Rep. Rex Reynolds, R-Huntsville, would allow state agencies and schools to pay state retirees up to $52,000 a year while they still draw retirement. Reynolds, the new chair of the House General Fund budget committee, told Alabama Daily News his bill is an effort to immediately help short-staffed agencies. He said House Bill 41 is not really a Retirement Systems of Alabama bill, but a “return-to-work bill.”

“This is our major department heads at the state level, to include local school systems, who are asking for this to better recruit talent and experience back in the workplace when we are all struggling (to find) workers,” Reynolds said.

Currently, retirees in the Teachers’ Retirement System and Employees’ Retirement System can earn $37,000 from an employer who participates in RSA without having to suspend their retirement benefits. Reynold’s bill would kick that earning potential up to $52,000 a year.

“Maybe ($37,000) a year might not pull them back into the workforce, but $52,000 might,” Reynolds said. “It’s about getting that experience back in the workforce.”

The bill says that unless the increase is later extended by the Legislature, it would be repealed in 2027.

Reynolds sponsored similar legislation last year. It passed the House but died in the Senate General Fund budget committee chaired by Sen. Greg Albritton, R-Range.

“My concerns of last year remain,” Albritton told Alabama Daily News. 

Albritton and Sen. Arthur Orr, R-Decatur, chair of the Senate education budget committee, both said they understand the seriousness of staffing issues, but hiring retirees as contractors who will not be contributing to the retirement system could have long-term effects. The retirement systems need new, permanent employees paying into them, the chairmen said. 

As of the end of 2021, TRS’s unfunded liability was $11.072 billion and its funded ratio was 70.7%; ERS’s unfunded liability was $6.295B and its funded ratio was 68.2%.

Those funded ratios are an improvement compared to about 10 years ago and Orr said new members are needed to continue the growth. Revenue to RSA comes from three sources: employee contributions, employer contributions and investment income. Since 1973, employee contributions have totaled $18 billion; employer contributions have totaled $29 billion and investment income has been $58 billion, according to RSA. 

Increasing the earning limit on retirees provides an incentive for an employee to retire and then turn around and draw a paycheck and retirement, Orr said.

Orr, who has recently sponsored several bills to increase educators’ pay, said that is the best route to fill positions.

Reynolds said he believes if agencies and schools need to hold onto retirees, they’re probably also hiring new employees.

“So when that new employee comes in, they’ll be contributing to the retirement system,” he said.

Reynolds said he expects more workforce-related bills in the upcoming session. 

“We have to do everything we can at the legislative level to help not only our state agencies, but our corporate and private partners as well,” Reynolds said.

The legislative session starts March 7.

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