Some Maine Workers May Face Tough Pension Choice

January 30, 2004 ( - Maine state employees and teachers who retired early and then went back on the job may have to choose between keeping their new post and their pension check.

The problem arises from a disconnect between a 2001 state law allowing state workers and teachers to keep collecting their pension if they return to work after retirement and Internal Revenue Service regulations, according to the Kennebec Journal and Morning Sentinel. State officials say the IRS doesn’t permit taxpayers to collect both a pension and a paycheck and that the state wants to bring Maine’s program into federal compliance. The inconsistency applies only to workers who leave work before their normal retirement age and then come back into other workplace.

As a result, the Maine State Retirement System Board of Directors is considering changing its rules so they better comply with the IRS code.

State Treasurer Dale McCormick, a member of the retirement system board, said the state wanted to help pave the way for teachers and other experienced government employees to return to service. “Many people retired under these rules knowing it was allowed, and took a lesser paying job,” McCormick said.

The board has spent time since then trying to rework the proposed rule change so it won’t have such a dramatic impact on people who retired early to take advantage of the program. The board plans to reveal a revised rule at the February 12 meeting, McCormick said. One possibility is that the plan would allow those currently affected to be exempt from the changes, she said.

The state must come into compliance with the IRS or risk losing “qualified plan” status, which means everyone in the state’s retirement system would have their contributions taxed, McCormick said.