When to report hours to the plan
Every year, ERSGA staff receives questions about rehired retirees and the 1,040 hours return-to-work provisions. One of the most frequent rehired retiree questions is in regard to independent contractors not on the payroll. Employers should know that few rehired retirees working as independent contractors are exempt from 1,040 hour reporting. The exemption to the 1,040 hour reporting requirement only applies to independent contractors who meet all of the following exceptions:
- The contracting entity has multiple employees
- The contracting entity has multiple contracts, and the contracts are not limited to State of Georgia employers
- The contractual relationship with the employer was not created as a means to allow a retired employee to continue employment after retirement in a position similar to the one he or she held before retirement.
Reporting hours worked for a rehired retiree as required by statute will not jeopardize an independent contractor’s status and make them an employee. The IRS* rules for determining employee versus independent contractor status are based on:
Behavioral Control: Facts showing whether the employer has a right to direct and control what work is accomplished and how the work is done through instructions, training or other means.
Financial Control: Facts showing whether the employer has a right to direct or control the financial and business aspects of the worker’s job.
- The extent to which the worker has unreimbursed business expenses
- The extent of the worker’s investment in the facilities or tools used in performing services
- The extent to which the worker makes his or her services available to the relevant market ▪ How the business pays the worker
- The extent to which the worker can realize a profit or incur a loss
Relationship of the Parties: Facts showing the type of relationship of the parties.
- Written contracts describing the relationship the parties intended to create
- Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay
- The permanency of the relationship
- The extent to which services performed by the worker are a key aspect of the regular business of the company