From the beginning of the consolidated South Dakota Retirement System in 1974, employees who qualified for retirement were allowed to retire, then get rehired by an agency participating in the system and draw both a salary and their retirement benefits.

In the early 1990s, the retirement system board became concerned that workers weren't strictly adhering to the rule that they must actually retire - complete termination of employment - before getting rehired.

Some employers were just calling an employee "retired" but letting him or her stay in the same job without advertising for other candidates.

Other employers applied the policy differently - some didn't allow re-employment after retirement, while others did so reluctantly, when it was hard to find a qualified candidate.

To address the problem, the board in 1993 proposed a 30-day waiting period between retirement and re-employment, but the plan did not pass the Legislature.

In the late 1990s, concern grew over the program when the board studied whether the practice brought unanticipated costs.

Another source of concern was a legislative report that recommended considering whether the opportunity to work after retirement should be available to all retirement system members regardless of employer.

Bills debated in the Legislature in 2002, 2003 and 2004 attempted to amend the system, with some lawmakers wanting to end the practice altogether and others trying to limit the extra cost it brought.

In 2004, the governor and Legislature approved several changes in what has been called a compromise, with the goal of reducing unanticipated costs, making the retire-rehire program cost-neutral, and clarifying the rules about how employees must be terminated before they can be rehired.

The current policy is based on these positions:

* The decision to hire a retiree is up to the employer and the employee.

* The retirement system shouldn't prohibit the hiring of a retiree but should not be harmed financially if a retiree returns to work.

* The system won't pay retirement benefits unless the employee is considered terminated from his or her job.

* If a retired employee is rehired, the work is treated independently from previous employment for the purposes of determining future benefits.

* Only members who retire with full benefits and return to work with an employer that is part of the state system can receive benefits while re-employed.

* The system's practices should not encourage re-employment out of state or in the private sector at the expense of public employment in South Dakota.

- Source: SDRS

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