Frequently Asked Questions: Hiring Retirees After PA 184

As reported in the July 28, 2022 edition of School Law Notes, Public Act 184 of 2022 significantly amended the Michigan Public School Employees Retirement Act (MPSER). As of July 25, 2022, retirees may return to work without earnings limitations or pension forfeitures so long as they had a bona fide termination and retired at least nine consecutive months earlier. While PA 184 may eventually help combat teacher shortages, it is important to consider the immediate impact and implications of hiring retirees, especially those who previously earned teacher tenure with your school. It is also important to be aware that PA 184’s application is not limited to teachers.

Q: May a board directly hire retired school officials for teaching positions?

A: Yes, a school may directly employ a retired school official to teach. The retiree, not the school, is responsible for ensuring that he or she has satisfied PA 184’s requirements, and school administra­tion should not give any advice to the retiree about retirement benefits. Retirees may be told to consult with their Michigan Public School Employees’ Retirement System (MPSERS) representa­tive about retirement benefits.

If hired, the retiree will be subject to control by the school board and will receive a salary from the school. Accordingly, the school is responsible for payroll taxes based on the returning retiree’s salary and position, including unemployment, Social Security, and Medicare taxes.

The school is not responsible for MPSERS retirement contribu­tions for a returning retiree who has satisfied PA 184 requirements because those who receive a pension from MPSERS are not considered active members. If a school hires a retiree who has not satisfied PA 184 requirements and forfeits the retiree’s pension, then the school may be responsible for MPSERS retirement contributions. The hiring school will be responsible for reporting the returning retiree’s name, position, and salary to MPSERS. ORS guidance issued on July 26, 2022, explains how to report public school retirees using the appropriate class code.

Q: Does a returning retired teacher hired directly by a board maintain tenure?

A: Maybe. If the retired teacher is returning to the school from which the teacher had attained tenure, the teacher is not required to serve a probationary period. If the retired teacher had earned tenure at one school but is hired at another school, the teacher may earn tenure after the probationary period of up to two full school years. School officials should carefully consider the tenure impact before hiring a returning retiree.

Q: Is a retired tenured teacher who is hired directly by a board entitled to continuous employment?A: Yes. Neither the Teachers’ Tenure Act (TTA) nor PA 184 allows a school to terminate a tenured teacher without TTA protection.

The Michigan Court of Appeals has long held that TTA rights and privileges cannot be waived or bargained away in any contract with a school. As a result, employment contracts for returning retired teachers should not include a requirement that the teachers will resign their employment on June 30 of the following year.

If a school does not want returning tenured retirees to be subject to the continuing employment protections of the TTA, school officials should consult with legal counsel before hiring a retired teacher.

Q: What rights does a retired teacher have when directly hired by a board as a long-term substitute teacher?

A returning retired teacher who is hired as a long-term substitute teacher has the same rights as any other long-term substitute teacher. If the returning retiree is directly hired as a substitute teacher assigned to a specific teaching position, and holds that position for 60 days, the teacher has the right under Revised School Code Section 1236 to remain in that position for the duration of the need for a long-term substitute teacher. At that point, the returning retiree is also entitled to the same pay, leave time, and other privileges the school grants to regular teachers.

If the returning retired substitute teacher holds the assignment for 150 days or more, the teacher must be given the first opportunity to accept or reject a contract for a position for which the substitute teacher is certified if openings remain after all other teachers in the school have been reemployed under the collective bargaining agreement. If the substitute teacher is in a long-term position with an ISD that operates at least a 220-day program, the teacher has the right of first refusal if the teacher has been in the long-term substitute position for 180 days or more. An exception to this right of first refusal rule exists when the long-term substitute is assigned to the teaching duties of a teacher who is out due to a terminal illness.

Q: Can a board hire retired teachers through a third-party contractor?

A: It depends. Retirees who are directly or indirectly employed by a “reporting unit” (i.e., a public school) are subject to PA 184. Those “indirectly” employed are those hired “through a contractual arrangement with other parties, or by engagement of a retirant by a reporting unit as an independent contractor.” PA 184, however, does not amend the Revised School Code requirements for schools to directly employ superintendents and non-substitute teachers. Also, an indirectly employed retiree’s assignment could constitute bargaining unit work, depending on a collective bargaining agreement, and render that indirect employment as impermissible outsourcing.

Q: Are returning retired teachers hired directly by a board entitled to the pay they had before retirement, and are they subject to the collective bargaining agreement?

A: Potentially. Many collective bargaining agree­ments or past practices provide that the school will honor previous years of experience when determining salary schedule placement.

Q: Must retired teachers hired directly by a board receive an annual performance evaluation?

A: Yes. The statutory requirement to evaluate teachers broadly applies to all individuals providing direct instruction. If the teacher received a rating of effective or highly effective on the two most recent (pre-retirement) evaluations, the school administrator may conduct the annual evaluation with only one observation.              

Q: What are the health insurance implications of hiring a retiree?

A: Before PA 184 went into effect, retirees who returned to work for a public school had their insurance premium subsidies forfeited during the period they held that employment. As of July 25, 2022, those retirees who return to work at a Michigan public school in compliance with PA 184 do not lose their insurance premium subsidy and can therefore remain on MPSERS insurance. They also may be entitled to applicable bargaining unit benefits, including health insurance.

Q: Does the Affordable Care Act apply if a returning retiree is employed at least 30 hours per week?

A: If the school has more than 50 employees, the Affordable Care Act applies. Accordingly, at least 95% of its full-time employees and their dependents must be offered affordable minimum essential coverage.