The DOs and DONTs of Early Retirement CH A R L E S G R I B B L E - - PowerPoint PPT Presentation

CH A R L E S G R I B B L E C H R I S S T E W A R T

The DOs and DON’Ts of Early Retirement

Phone-515-284-5737 Email: cgribble@parrishlaw.com cstewart@parrishlaw.com

Charles Gribble-Bio

 Charles Gribble received his Bachelors and Masters

Degrees from the University of St. Thomas in St. Paul, Minnesota and his J.D. from

• Drake. Mr.

Gribble is currently a member of and has been on three separate occasions, chairman of the Labor and Employment Law Committee of the Iowa State Bar

• Association. Mr. Gribble is currently a Partner with

Parrish Kruidenier Law Firm and practices predominately in Labor Law. Mr. Gribble has argued more than 75 cases on Labor Law matters before the Iowa Supreme Court.

Chris Stewart-Bio

 Chris Stewart received his Bachelors Degree from the

University of Northern Iowa and his J.D. from

• Drake. Mr. Stewart is currently an Associate at

Parrish Kruidenier Law Firm and practices predominately in Labor Law, Criminal Defense and Civil Litigation.

Can a County implement an early retirement plan?

 Yes, however the County must make sure that the plan conforms to

the law.

Why Offer an Early Retirement Plan?

 Cost Savings  Reduction in Force  Employee Goodwill

Provisions Needed in an Early Retirement Plan

1.

Statement of Purpose

2.

Eligibility Requirements

3.

Application Process

4.

Description of Benefits

• 1. Statement of Purpose

 Any early retirement plan should involve a statement of purpose. This

helps to avoid a claim that the purpose of the plan is simply just to discharge older employees.

 The purpose must be objective and could state that the County is

establishing an early retirement plan to, in the long term, reduce employee costs, while at the same time providing a benefit to employees in allowing them to choose early retirement.

Provisions Needed in an Early Retirement Plan

Provisions Needed in an Early Retirement Plan

• 2. Eligibility Requirements
• The County will need to clearly and specifically state eligibility

requirements for their early retirement plan.

• As long as the “objective factors” explain the exclusion, the County may

choose to limit early retirement benefits to a certain group of employees such as:

• Highly compensated individuals
• Employees with a certain amount of years
• Only employees in particular departments as long as “objective factors”

explain the exclusion

Provisions Needed in an Early Retirement Plan

• 3. Application Process
• The County should provide the first date on which a request for early

retirement may be made and the last day in which an application for early retirement will be accepted.

• The County should make clear the plan is a one time offer and will not

be repeated unless the County, in its discretion, determines at some point in the future to again offer the plan.

• The application process and plan should be specific, for example, the

plan will only be made available to the first 15 employees that apply and

• r the total amount spent on the plan will not exceed $500,000.

• 4. Description of Benefits
• Each County will decide what benefits they will offer in their own plan.

These benefits should be described in detail as to not leave any interpretation as to what is included.

• Early retirement benefits may be provided on a sliding scale, but

benefits must not decrease as the age of the employee increases.

• Benefits can be provided on a monetary basis or as a percentage. These

benefits may either be fixed (for example, $10,000 for all employees or 30% of salary for all employees) or it may be floating (for example $500 or 5% of salary for each year of service).

Provisions Needed in an Early Retirement Plan

How are years of service determined?

 Years of service should be carefully, objectively and consistently

defined and applied. The County will have some discretion in this but some questions that may arise are as follows:

 Are years of service limited to employment in the County or does it

include all years of service in the public sector?

 Does an extended leave of absence count as years of service?  Does a year of absence due to layoff, count as a year of service?  Must the years of service be consecutive or is the calculation based on

the employee’s total years of service?

Commonly Asked Questions: Years of Service

Can a County place a maximum age limitation on the eligibility for an early retirement plan?

 No, the 8th Circuit Court of Appeals held that a maximum age

eligibility limitation on an early retirement plan (only employees between the ages of 55-65 may qualify for an early retirement plan) was a violation of the ADEA. Jankovitz v. Des Moines Indep. Cmty.

• Sch. Dist., 421 F.3d 649 (8th Cir. 2005).

 You can, however, state that an employee must have worked for the

County at least “x” number of years in order to be eligible

 Recommendation- The plan should not mention age at all, but rather focus on

the length of service to the County- Example-”Eligible employee has been an employee of the County for at least 20 years.”

Commonly Asked Questions: Age Limitations

Commonly Asked Questions: Health Insurance

What about health insurance?

 It is important to determine whether employees who retire early will be entitled

to participate in the County’s health plan until they reach Medicare eligibility. (See Iowa Code 509A.13)

 Counties offering early retirement plans may provide in the plan that benefits

will be reduced or eliminated when a participant in the plan becomes eligible for Medicare. ( 29 CFR Section 1625.32 (b)).

 The county must reserve the right to modify the plan benefits, the right to

change the insurance carrier, and the right to change the benefit administrator. If the County fails to do so, the County may be required to continue to provide health insurance benefits at the same level that was in effect at the time employee began receiving early retirement benefits.

 The County must continue to be compliant with the COBRA requirements.

Commonly Asked Questions: Early Retirement Plan Options

Can the County offer options with regards to benefits to employees retiring early?

 Yes, employees may be given the option of receiving cash, insurance

premium payments or some combination of cash and insurance premium payments.

 Benefits can be provided in a lump sum or periodic payments. The

County should clearly identify the time frame for periodic payments and if the employee is given the option and elected to receive periodic payments, that election should be irrevocable.

Commonly Asked Questions: Obtaining a Waiver

Should the County obtain a waiver from the employee?

 Yes, early retirement plan benefit recipients should be required to

execute a release of waiver of liability which specifically releases the County from any claims under the ADA. In order to comply with the Older Worker Benefit Protection Act (OWBPA) an ADA waiver must meet the seven requirements that are set out in the OWMPA.

Waiver Requirements:

1.

Must be written in a manner that can be clearly understood

2.

Must specifically refer to rights or claims arising under the ADEA

3.

Must advise the employee in writing to consult an attorney before accepting the offer

4.

Must provide the employee with at least 21 days to consider the offer

5.

Must give the employee seven days to revoke his or her signature

6.

Must not include rights and claims that may arise after the date on which the waiver is executed

7.

Must be supported by consideration in addition to which the employee is already entitled

Commonly Asked Questions: Obtaining a Waiver

Commonly Asked Questions: Involuntary Early Retirement

Can a County force an employee to take early retirement?

 No, a County may not tell an employee that if they don't accept an offer

• f early retirement that they will be terminated.

Commonly Asked Questions: Union Negotiations

Do you have to negotiate an Early Retirement Plan with the Union(s) before implementing it?

 Yes, the County must give the Union(s) notice and an opportunity to

request to bargain. (Board of Regents v. Iowa Public Employment Relations Bd., 861 N.W.2d 268 (IA Ct. of App. 2014))

DO NOT GIVE TAX ADVICE

 Make sure to include a statement in the policy that explains the

employee is responsible for seeking independent legal and tax advice regarding any tax consequences associated with the payment of the early retirement benefits.

Commonly Asked Questions: Income Tax Issues

Questions?