Independent contractors (1099 employees) are not subject to PERA membership. However, contributions are required on compensation paid to PERA retirees who perform services as an independent contractor.
Employers should confirm if potential employees/independent contractors are PERA retirees by using the SSN Verification Tool in STARS. The SSN Verification fact sheet provides an overview on how to submit SSN Verification requests via your PERA Employer STARS account.
Compensation paid to a PERA retiree who is an independent contractor or is working for a company owned or operated by an affiliated party, is subject to employer contributions, including Amortization Equalization Disbursement (AED) and Supplemental Amortization Equalization Disbursement (SAED), and working retiree contributions.
It is the employer’s responsibility to pay contributions, AED, and SAED within 30 days of paying the retiree independent contractor. Working retiree contributions will also be due, and will be taken directly as a benefit reduction from the retiree’s benefit check
For more information, please refer to the Working After Retirement for a PERA Employer as an Independent Contractor or Through an Affiliated Party fact sheet.
Responsibilities of PERA retirees include:
- Disclose retiree status to PERA employer
- Complete and submit Retiree Working for a PERA Employer form (available in the Working After Retirement booklet)
- If performing services under a company name/TIN, the retiree must also complete a Disclosure of Compensation form (available in the Working After Retirement booklet)
- Negotiate contract and disclose expenses (employee contributions CANNOT be reported as expense).
- Submit invoice to employer
Responsibilities of the PERA Employer include:
- Ask for the contractor’s name and SSN (even if they are being paid under a TIN) and verify status using the SSN Verification Tool in STARS
- While negotiating the contract, obtain information about mileage, materials reimbursement, and other non-includable expenses
- Determine if contributions are due
- Submit Retiree Working for a PERA Employer form to PERA after receiving it from the retiree and completing the second section
- Finalize payment structure prior to reporting to PERA. Contributions cannot be paid as a deduction from the retiree’s salary
- Report independent contractor’s earnings within 30 days of paying the retiree independent contractor
Responsibilities of PERA include:
- After receiving the completed contribution report from the employer, PERA begins the process to bill the contract for the working retiree contributions. Working retiree contributions will be withheld from the retiree’s next monthly benefit.
- If a Disclosure of Compensation form has been submitted, PERA’s Data Research Team will review the form and the retiree salary reported, to ensure that all salary is reported and all employer contributions are paid.
- PERA’s Payroll Team will set up a deduction form the retiree’s benefit to pay the working retiree contribution based on the amount reported by the employer. The deduction may not take place until the month following the receipt of the contribution report.
- Once the review process is complete, PERA will send a letter to the retiree advising them of the upcoming benefit reduction.