Smartschoolsplus double-dipping ‘retired’ school employees

By Linda Bentley | June 11, 2008

CCUSD – After the Cave Creek Unified School District Governing Board approved a consent agenda item with a number of teachers and administrators retiring and being immediately rehired through Smartschoolsplus, Inc., readers had a lot of questions about the program.

Smartschoolsplus is basically an employee leasing company that specializes in retired educators and administrators who wish to remain on the job or return to work under the guidelines of the Arizona State Retirement System (ASRS).

It’s also double dipping, a means by which employees who belong to the ASRS can continue to receive a paycheck and their retirement check.

By rehiring through a middleman, such as Smartschoolsplus or Educational Services, Inc., schools are able to get around state statutes that prohibit government employees from collecting retirement benefits while remaining on the job.

In 2002, the same year Smartschoolsplus was started by William and Sandra McClelland, the IRS requested comments on the subject referred to as “phased retirement.”

Florida, which has no such restrictions on how many pensions a person can receive, not only has its fair share of double-dippers but it has 131 triple-dippers, which include principals, teachers, sheriff’s deputies, court clerks and a host of other public employees, as reported in the St. Petersburg Times in March.

In Arizona, as more employees reach a magic number, consisting of a formula based on age and number of years employed, more are opting to double-dip.

A study was prepared by Keith Brainard, considered the national expert on state retirement systems, in October 2002 for the National Association of State Retirement Administrators, titled: “Phased Retirement Overview: Summary of Research and Practices.”

Brainard stated the chief advantages of phased retirement programs claimed by employers included: Retention of trained and qualified personnel, reduced costs associated with training new employees, along with reduced costs achieved through lower salary and benefits expenses made possible by employees shifting from full time to part time.

Advantages claimed by employees were: Flexible work arrangements, the opportunity to gradually transition into retirement rather than a sudden abrupt shift, and the opportunity to supplement retirement income or increase future retirement benefits by deferring current retirement income.

Brainard pointed out concerns over phased retirement plans, stating, “Modifying the designs of a … plan to implement phased retirement programs can impose new liabilities on a retirement plan. Plan designs that permit an employee to work fewer hours, for a shorter period of time, or that allow pension benefits to be paid earlier, typically increase the plan’s actuarial costs.”

He also mentioned double dipping, which he said can cause negative reactions from a participant’s co-workers, the media and the general public, “possibly resulting in workplace morale issues and negative publicity about public pension plans.”
There was plenty of bad publicity surrounding the Maricopa County Sheriff’s Office many years ago when Chief Deputy Dave Hendershott retired and was immediately rehired back in the same position.

Sheriff Joe Arpaio even began introducing him as Dave “the double dipper” Hendershott.

The public reacted pretty much the same way when Phoenix Police Chief Jack Harris retired, only to magically come back the next day as the city’s “public safety manager,” performing exactly the same duties.

The IRS weighed in seeking comments and noted Internal Revenue Code limitations complicated participation in phased retirement plans as certain plans were precluded from making distributions to participants until they have terminated employment or attained normal retirement age.

There were also legal obstacles cited by Brainard, whereas the traditional plan design, codified in the laws governing public retirement systems, is inconsistent with the concept of phased retirement.

Switching to part time employment typically would reduce the amount of an employee’s retirement benefits.

Because Medicare is only available to individuals 65 and over, Brainard said, “As a result, retiring prior to 65 can challenge many workers’ ability to afford health care coverage,” especially if they were to switch to part time employment.

He also noted fiscal obstacles to accommodating phased retirement, such as lowering the normal retirement age or loosening in-service distribution rules, which he said can increase a pension plan’s liabilities and costs.

The IRS was also concerned that a phased retirement arrangement beginning before normal retirement age did not meet the current definition of “retirement.”

Florida Sen. Bill Posey, R-Rockland, after learning how widespread the problem was, attempted to pass a bill that would have prohibited employees from being retired again by the same agency. He also admitted changing the law wouldn’t be easy since some legislators profit from the very same system.

According to its website, Smartschoolsplus is a “values-driven company,” stating its leadership understands effective learning and high performance organizations.
Smartschoolsplus says its values and guiding principles are in recognizing “the expertise and knowledge of each client through open, honest communication and ethical decision making, embracing an environment that honors integrity.”

In other words, Smartschoolsplus, as a for-profit corporation, enables employees to double dip through a program that legally circumvents the retirement rules of the ASRS.

And, as more and more employees qualify to double dip through this phased retirement program via a profit-making middleman, fewer and fewer employees are making contributions to ASRS, in which case taxpayers could eventually be forced to foot the bill for the difference.