Terminations: Common Misconceptions

As you already know, for an employee to retire or refund their PERA account, they must first completely sever the employer/employee relationship. This means that the employee is no longer working for you (or any other PERA employer) and is not maintaining any employer benefits as an active employee. Ensuring you are terminating your employees correctly is very important and can result in some unfortunate situations if not done properly.

Let’s test your knowledge:

1. I have changed the employee’s status from ‘active employee’ to ‘retiree’ in our payroll system.  They are maintaining the benefits they acquired during employment and can utilize their previously earned sick leave as a retiree working in their transition year. This employee is properly terminated and can retire from PERA.
   • False. In order for there to be a bona fide termination you must end the employee’s relationship including paying out all accrued leave and dropping the employee from any benefits program you contribute to for staff. You should treat any employee who is retiring and returning to work the same as any employee who terminates employment and never returns to work.
2. An employee only needs to take 30 days off from their last day on the job before they can get rehired and begin working as a retiree.
   • False. The proper waiting period for any newly retired employee to be rehired and return to work can vary as it is the period of time between their termination date from the current employment and the last day in their effective month of retirement. If an employee is hired and returns to work too soon, their retirement may be deemed invalid, and all benefit payments paid to that individual will need to be immediately paid back to PERA. If they are rehired and work in their effective month, their retirement may not be canceled (unless they work on the first BUSINESS day of their effective month), but they will be penalized 5% for every day they work regardless of how many hours they work each day.
3. If I terminate an employee who is not eligible to retire, I do not have to notify PERA.
   • False. An employee who terminates their employment without returning to work in another PERA-covered position should be terminated in your system and reported as terminated through STARS. If you fail to do so and the previous employee is trying to refund/rollover their PERA account, you will prevent that refund/rollover from being paid.  A valid termination date must be submitted to PERA whenever an employee terminates employment.
4. If I keep a vacated position open (or suspended) after an employee terminates employment by not properly reporting that individual as terminated, PERA will still be able to process any refund/rollover that individual requests.
   • False. If you are holding off on reporting a terminated employee to PERA, you will be holding up that previous employee from accessing their member contributions as PERA cannot distribute contributions without a valid termination date from the employer.

These situations are not comprehensive but rather highlight the most common misconceptions an employer has when terminating staff.  It is important to be timely when communicating all terminations and allowing the appropriate waiting period before rehiring any retired employees back. If there are other questions you have regarding the proper way to terminate employees, please contact your Employer Representative.