At full retirement age (67), Social Security stops withholding benefits regardless of earnings, but multiemployer union pension plans operate under entirely separate rules.
Working 40 hours in the same industry, trade, and geographic area covered by a pension plan can suspend that month’s benefit payment entirely.
Failing to report disqualifying work can trigger overpayment recovery, where future pension checks are garnished to repay benefits already issued.
Picture a retired ironworker, 67 years old, who hung up the hard hat two years ago and settled into a routine supported by two monthly checks: Social Security and a multiemployer union pension. Then the phone rings. A general contractor needs an experienced hand for one high-stakes bridge replacement. The job will run across four long days and pay $6,000.
PeopleImages / Shutterstock.com
He has reached full retirement age (FRA), so he figures no retirement system cares how much he earns anymore. He takes the job and works 40 hours. His Social Security check arrives on schedule. His union pension check does not. He retired under one rulebook. The weekend put him back to work under another.
Why Social Security Kept Paying
Once a worker reaches FRA, Social Security’s retirement earnings test disappears. Wages and self-employment income no longer cause benefits to be withheld, regardless of how much the retiree earns. For someone born in 1960 or later, FRA is 67. Our ironworker has reached it, so the $6,000 bridge job does not interrupt his Social Security retirement benefit. His union pension follows a separate set of rules.
Why 40 Hours Can Stop the Pension
A multiemployer pension plan may suspend benefits when a retiree returns to what the plan defines as disqualifying employment. After the plan’s normal retirement age, the federal framework generally permits a suspension for a month in which the retiree performs at least 40 hours of work in:
If you’ve saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.
Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)
The same industry in which covered employers participate
The same trade or craft in which the retiree previously worked
The same geographic area covered by the plan
The bridge assignment checks every box. He returned to construction, performed ironwork and worked inside the plan’s territory. Reaching 40 hours in the calendar month gave the plan grounds to suspend that month’s payment under its terms.
The exact result still depends on the plan document. A plan may provide more generous treatment, narrowly define its geographic area or exclude certain kinds of work. But a retiree cannot assume that reaching Social Security’s FRA also frees him from his pension’s return-to-work rules. Social Security’s FRA and the pension’s normal retirement age are separate milestones set by separate systems.
A Good Weekend Can Carry a Hidden Price
Suppose his pension pays $3,200 a month. The $6,000 assignment may still leave him ahead before taxes, even after one pension payment is suspended. But that is a calculation he should make before accepting the work, not after the fund office spots his name on an employer report.
The surprise becomes more expensive when the retiree fails to disclose the job. Many plans require retirees to report potentially disqualifying employment and allow them to request an advance determination. If the plan paid benefits for a month in which they should have been suspended, it may seek to recover the overpayment according to its rules. The result is not necessarily a single missing check. The retiree may receive a suspension notice months later and learn that part of his future pension payments will be used to repay benefits already issued.
A retiree considering work in his former trade should send the pension fund a written description of the proposed assignment. It should identify:
The employer and project location
The trade or duties he will perform
The expected number of hours
The calendar month in which the work will occur
He should ask the fund for a written determination before accepting the job. A former coworker’s experience is not enough. Two retirees can perform similar assignments and receive different answers because they belong to different funds, work in different jurisdictions or cross different monthly hour totals.
He should also ask when payments would resume, what reporting the fund requires and how it recovers any pension payment made during disqualifying employment. The phone call offered $6,000 for four days of work. It did not mention the $3,200 pension check attached to the decision. Social Security asked whether he had reached 67. The pension asked what work he performed, where he performed it and how many hours appeared on the timecard. He had retired under one rulebook, not both.
A $1,000,000 Income Portfolio
If you’ve saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.
Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)
