Public Employees

Plain English Breakdown

The bill does not specify conditions for extensions beyond one year, only that additional periods can be met if conditions are satisfied.

Rules for Retired Public Employees to Return to Work

This act changes Tennessee law to require a 'bona fide separation of service' before retired public employees can return to work temporarily without losing their retirement benefits.

What This Bill Does

• Requires that retired members must have had a complete break from employment for at least 60 days after retiring and before returning to work, with no prearranged agreement to return to the same employer.
• Limits reemployment periods to one year, with possible extensions if conditions are met.
• Reduces the retired member's benefit during reemployment to 70% of their original allowance.
• Requires employers to pay into the retirement system or contribute a percentage of the retiree’s earnings during reemployment.
• Allows retirees to participate in deferred compensation plans but not accrue additional retirement benefits.

Who It Names or Affects

• Retired public employees who want to return to work temporarily.
• Employers hiring retired public employees for temporary positions.

Terms To Know

bona fide separation of service

A complete break from employment after retirement with no prearranged agreement to return to the same employer.

Limits and Unknowns

• The bill does not specify what happens if a retiree returns without meeting the 'bona fide separation' requirement.
• It's unclear how this will affect retirees who returned before the effective date of July 1, 2025.

Official Summary Text

RETURN TO SERVICE TEMPORARILY

Present law authorizes a re
tired member or prior class member of the Tennessee consolidated retirement system (TCRS), and a retiree of a local retirement fund receiving benefits, to return to service temporarily in a position covered by TCRS and continue to draw such person's retir
e
ment allowance. However, certain conditions must be met. One condition is that the retired member does not return to service until the expiration of at least 60 calendar days from the member's effective date of retirement, unless such member returns to
s
ervice in a position wherein the member renders no more than one-half the hours the member was scheduled to work prior to retirement and the head of the employing entity certifies to the division of retirement that no other qualified persons are reasonabl
y
available to fill the position. This bill removes this condition.

This bill adds as a new condition that the retired member must have had a bona fide separation of service. A "bona fide separation of service" means a separation of service where there
is (i) no prearranged agreement, whether verbal or in writing, prior to the member's retirement between the member and a participating employer in the retirement system for the member to return to work for the employer after retirement; and (ii) a comple
t
e separation of service, from all employment in a position or positions covered by the retirement system, for at least 60 calendar days between the member's effective date of retirement and the first day of work for the employer as a retiree. This bill a
l
so requires the head of the employing entity, or the head's designee, to certify to the retirement division that there was no explicit prearrangement at the time of the member's retirement for future employment with the new employing entity after the memb
e
r's retirement.

Present law prohibits the retiree from accruing any additional retirement credit during the retiree's period of reemployment. This bill adds that the retired member, if otherwise eligible, may participate in the state's 401(k) or 457(b)
deferred compensation plans, but remains ineligible to accrue additional retirement benefits in the retirement system as a result of the member's reemployment.

For a member whose effective date of retirement was in fiscal years 2022-2023, 2023-2024, or 2
024-2025, with the state fiscal year being from July 1 to June 30, this bill provides that if the retirement system discovers that the member did not have a bona fide separation of service, then the member must be treated as receiving an in-service distri
b
ution and the retirement system must make any required tax reporting changes to reflect the in-service distribution in prior years. After July 1, 2025, the identified members may be temporarily reemployed after a bona fide separation of service.

REEMPL
OYMENT AFTER RETIREMENT

This bill authorizes a retired member or prior class member of the retirement system, and any retired member of a local retirement fund receiving benefits to be reemployed in a position covered by the retirement system without the
loss or suspension of the retired member's retirement system benefits, as long as all of the following conditions are met, as certified by the employer:



The retired member must have had a bona fide separation of service.



The retired member is reemployed in a hard-to-fill position. A "hard-to-fill position" is a position where one or more of the following conditions are met: (i) the employer is experiencing difficulty in recruiting and retaining qualified employees for the position; (ii) the position requires specialized certification, credentials, or education; (iii) the demand for the position exceeds the supply; (iv) the position is in high demand in the marketplace; (v) the position is filled by key personnel; (vi) the position requires specific skills and experience; or (vii) the position has other unique recruitment or retention issues identified and documented by the employer.



During the reemployment, the retirement benefit payable to the retired member must be reduced to 70% of the retirement allowance the member would have otherwise been entitled to receive.



The retired member's reemployment must not exceed one year. However, the retired member may be reemployed for additional one-year periods, as long as this bill's conditions are met for each period of reemployment.



To fund the liability created by the bill, the retired member's new employer must pay to the retirement system during each period of reemployment the greater of (i) a payment equal to the amount the employer would have contributed to the retirement system had the retired member been a member of the retirement system during the period of reemployment; or (ii) an amount equal to 5% of the retired member's earnable compensation.



The retired member, if otherwise eligible, may participate in the state's 401(k) or 457(b) deferred compensation plans, but is not eligible to accrue additional retirement benefits in the retirement system as a result of the member's reemployment.



Prior to the commencement of each reemployment of the retired member, the head of the retired member's new employer, or the head's designee notifies the retirement division with authenticated documents or information required by the retirement system and certifies in writing to the retirement division that (i) the position is a hard-to-fill position; (ii) the retired member has the requisite experience and training for the position to be filled; (iv) no other qualified persons are reasonably available to fill the position; and (iv) there was no explicit prearrangement at the time of the member's retirement for future employment with the new employing entity after the member's retirement.



The retiree is not drawing disability retirement benefits.
RETIREE EMPLOYED AS A TEACHER

Present law authorizes a person ret
ired for at least one year from TCRS, from any superseded system administered by the state, or from any local retirement fund, may accept employment as a K-12 teacher without loss or suspension of retirement benefits as long as certain conditions are met.

Those conditions include all of the following:



The retired member holds a teacher's professional license or certificate as may be required.



The retired member is not entitled to tenure status.



The retired member is not eligible to accrue additional retirement benefits, accrue leave or receive medical insurance coverage as a result of such employment.



The retired member must not receive automatic credit for years of experience in determining compensation, so long as the salary paid is not less than the rate of compensation set by the school system for teachers with no experience filling similar positions, nor may such salary exceed 85% of the rate of compensation set by the school system for teachers with comparable training and years of experience filling similar positions.

This bill removes these provisions. This removal takes effect January 1, 2026, while the rest of this bill takes effect July 1, 2025.

REEMPLOYMENT AS A TEACHER

Present law authorizes a retired member of TCRS or of a supersede
d system, or of a local retirement fund established, may be reemployed in a position covered by the retirement system without the loss or suspension of the retired member's TCRS benefits as long as the following conditions are met:



The retired member is reemployed as a K-12 teacher, as a K-12 substitute teacher, or as a K-12 school bus driver.



The retired member is not reemployed until the expiration of at least 60 calendar days from the member's effective date of retirement.



During the reemployment, the retirement benefit payable to the retired member must be reduced to 70% of the retirement allowance the member would have otherwise been entitled to receive.



To fund the liability, the retired member's new employer must pay to TCRS during each period of reemployment the greater of (i) a payment equal to the amount the employer would have contributed to the retirement system had the retired member been a member of the retirement system during the period of reemployment, or (ii) an amount equal to 5% of the retired member's pay rate.



The retired member is not eligible to accrue additional retirement benefits as a result of the member's reemployment.



Upon the reemployment of the retired member, the retired member's new employer must notify the retirement system of the member's reemployment with documents or information required by the retirement system.



The retiree is not drawing disability retirement benefits.

This bill removes these provisions. This removal takes effect January 1, 2026, while the rest of this bill takes effect July 1, 2025.

Current Bill Text

SENATE BILL 251
By Yager

HOUSE BILL 313
By Marsh

HB0313
001106
- 1 -

AN ACT to amend Tennessee Code Annotated, Section 8-
25-213 and Title 8, Chapter 36, Part 8, relative to
reemployment after retirement.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 8-36-805, is amended by deleting the
section and substituting:
(a) A retired member or prior class member of the retirement system, and a
retiree of a local retirement fund receiving benefits in accordance with chapter 35, part 3
of this title may return to service temporarily in a position covered by the retirement
system and continue to draw the person's retirement allowance; provided, that all of the
following conditions are met:
(1) The retired member must have had a bona fide separation of service.
For purposes of this section, a "bona fide separation of service" means a
separation of service where there is:
(A) No prearranged agreement, whether verbal or in writing, prior
to the member's retirement between the member and a participating
employer in the retirement system for the member to return to work for
the employer after retirement; and
(B) A complete separation of service, from all employment in a
position or positions covered by the retirement system, for at least sixty
(60) calendar days between the member's effective date of retirement and
the first day of work for the employer as a retiree;

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(2) During a twelve-month period, the retiree must not work more than
one hundred twenty (120) days or the equivalent of one hundred twenty (120)
days, or if employed as a teacher by an institution of higher learning, twenty-four
(24) quarter credit hours or eighteen (18) semester credit hours;
(3) The entire compensation payable to the retired member for the
temporary employment period must not exceed an amount equal to the sum of
sixty percent (60%) of the annual full-time salary received by the retired member
in the year immediately prior to the member's last paid day of covered
employment, adjusted by five percent (5%) for each year since the member's last
paid day of covered employment or by such other percentage as may be
determined by the treasurer and the commissioner of human resources. In
determining the percentage for a given year, the treasurer and the commissioner
of human resources may consider any matter which, in their discretion, they
deem relevant, including, but not limited to, the condition of the labor market and
the ability to fill the respective positions;
(4) The retired member may work beyond the one hundred twenty (120)
days prescribed in subdivision (a)(2) if employed as a substitute teacher in a
public school system; provided, that the compensation payable to the retired
member for such work does not exceed the rate of compensation set by the
public school system for substitute teachers filling similar vacant positions, and
the total salary paid to any such retired member for teaching during the twelve-
month period does not exceed the pertinent pro rata share of average salary
being paid at the institution in the academic discipline concerned;
(5) The head of the employing entity or the head's designee:

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(A) Certifies to the retirement division the member's name, period
to be employed, number of days to be worked, compensation to be paid,
anticipated termination date, and that there was no explicit
prearrangement at the time of the member's retirement for future
employment with the new employing entity after the member's retirement.
The certification must be made in the manner prescribed by the
retirement division and must be filed annually, if applicable, and
acknowledged by the member;
(B) Submits a statement showing working hours and
compensation for the retiree when requested; and
(C) Is subject to audit to verify working hours and the
compensation being paid;
(6) If the period of return to service or the compensation therefor exceed
that specified in this section, then the person's monthly retirement allowance
must be reduced by the greater of the following:
(A) Each day worked in excess of the limitation must result in the
loss of one-twentieth (1/20) of the monthly retirement allowance; or
(B) Any compensation received in excess of the limitation must
reduce the retirement allowance payable by the ratio the compensation
exceeds the limitation;
(7) The retirement system may obtain reimbursement for any retirement
benefits overpaid as a result of a retiree's reemployment in excess of that
permitted by this section, by deductions from a retiree's monthly benefit;
(8) The retired member, if otherwise eligible, may participate in the
state's 401(k) or 457(b) deferred compensation plans, but is not eligible to accrue

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additional retirement benefits in the retirement system as a result of the
member's reemployment; and
(9) The retiree is not drawing disability retirement benefits under this
chapter.
(b) For a member whose effective date of retirement was in fiscal years 2022-
2023, 2023-2024, or 2024-2025, with the state fiscal year being from July 1 to June 30, if
the retirement system discovers that the member did not have a bona fide separation of
service, then the member must be treated as receiving an in-service distribution and the
retirement system shall make any required tax reporting changes to reflect the in-service
distribution in prior years. After July 1, 2025, the identified members may be temporarily
reemployed pursuant to this chapter after a bona fide separation of service.
SECTION 2. Tennessee Code Annotated, Section 8-36-809, is amended by deleting the
section and substituting:
Notwithstanding another law to the contrary, a retired member or prior class
member of the retirement system, and any retired member of a local retirement fund
receiving benefits pursuant to chapter 35, part 3 of this title may be reemployed in a
position covered by the retirement system without the loss or suspension of the retired
member's retirement system benefits; provided, that the following conditions are met, as
certified by the employer:
(1) The retired member must have had a "bona fide separation of
service". For purposes of this section, a "bona fide separation of service" means
a separation of service where there is:
(A) No prearranged agreement, whether verbal or in writing, prior
to the member's retirement between the member and a participating

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employer in the retirement system for the member to return to work for
the employer after retirement; and
(B) A complete separation of service from all employment in a
position or positions covered by the retirement system of at least sixty
(60) calendar days between the member's effective date of retirement and
the first day of work for the employer as a retiree;
(2) The retired member is reemployed in a hard-to-fill position. For
purposes of this section, a "hard-to-fill position" means a position where one (1)
or more of the following conditions are met:
(A) The employer is experiencing difficulty in recruiting and
retaining qualified employees for the position;
(B) The position requires specialized certification, credentials, or
education;
(C) The demand for the position exceeds the supply;
(D) The position is in high demand in the marketplace;
(E) The position is filled by key personnel;
(F) The position requires specific skills and experience; or
(G) The position has other unique recruitment or retention issues
identified and documented by the employer;
(3) During the reemployment, the retirement benefit payable to the retired
member must be reduced to seventy percent (70%) of the retirement allowance
the member would have otherwise been entitled to receive;
(4) The retired member's reemployment must not exceed one (1) year;
however, the retired member may be reemployed for additional one-year periods,

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provided, that the conditions contained in this section are met for each period of
reemployment;
(5) To fund the liability created by this section, the retired member's new
employer shall pay to the retirement system during each period of reemployment
the greater of:
(A) A payment equal to the amount the employer would have
contributed to the retirement system had the retired member been a
member of the retirement system during the period of reemployment; or
(B) An amount equal to five percent (5%) of the retired member's
earnable compensation;
(6) The retired member, if otherwise eligible, may participate in the
state's 401(k) or 457(b) deferred compensation plans, but is not eligible to accrue
additional retirement benefits in the retirement system as a result of the
member's reemployment;
(7) Prior to the commencement of each reemployment of the retired
member, the head of the retired member's new employer, or the head's
designee:
(A) Notifies the retirement division of the retired member's
reemployment with documents or information required by the retirement
system; and
(B) Certifies in writing to the retirement division that:
(i) The position is a hard-to-fill position;
(ii) The retired member has the requisite experience and
training for the position to be filled;

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(iii) No other qualified persons are reasonably available to
fill the position; and
(iv) There was no explicit prearrangement at the time of
the member's retirement for future employment with the new
employing entity after the member's retirement; and
(C) Makes the certification in the manner prescribed by the
retirement division, file the certification annually, if applicable, and ensure
the certification is acknowledged by the member; and
(8) The retiree is not drawing disability retirement benefits under this
chapter.
SECTION 3. Tennessee Code Annotated, Section 8-36-801(c), is amended by deleting
the second sentence and substituting:
This subsection (c) does not apply to retirees who return to service in a position covered
by the retirement system as provided in § 8-36-805, § 8-36-809, § 8-36-810, § 8-36-818,
or § 8-36-820.
SECTION 4. Tennessee Code Annotated, Section 8-25-213(1), is amended by deleting
the subdivision and substituting:
(1) Is subject to the applicable work and compensation limits set forth in § 8-36-
805(a).
SECTION 5. Tennessee Code Annotated, Sections 8-36-821 and 8-36-822, are
amended by deleting the sections in their entireties.
SECTION 6. Section 5 takes effect January 1, 2026, the public welfare requiring it. All
remaining sections of this act take effect July 1, 2025, the public welfare requiring it.