9-24-7: Retiree Return-to-Work Rules and Earnings Caps

Under South Carolina retiree return to work rules, a member of the South Carolina Retirement System (SCRS) or the Police Officers Retirement System (PORS) can go back to a public-sector job and keep collecting a pension, but only after a full 30-day break in service and, for most retirees, only up to $10,000 in annual earnings from a covered employer before the benefit shuts off for the rest of the calendar year. Contributions still come out of the paycheck, and they do not increase the pension. Miss a detail and the retirement allowance can be suspended mid-paycheck.

The 30-Day Break in Service

Before returning to any position with an employer that participates in the state retirement systems, a retiree must be completely separated for at least 30 consecutive calendar days after the retirement date. No work of any kind for a participating employer during that window. Return sooner and the retirement allowance is suspended for the entire time the retiree remains employed.¹

The separation has to be real. A prearranged deal to come back, whether written or informal, is treated as evidence that no true separation happened. When the system finds an arrangement like that, the retiree’s benefits can be suspended and the employer must repay the system for benefits already paid out.¹

The $10,000 Earnings Cap

Once the 30 days pass, a returning retiree can earn up to $10,000 per calendar year from covered employment with no effect on the monthly benefit. Cross that line and the retirement allowance stops for the rest of that calendar year. Payments resume the following January.¹

The cap only applies to compensation from employers that participate in a retirement system administered by the South Carolina Public Employee Benefit Authority (PEBA). A retiree who takes private-sector work, or work with any non-participating employer, is not subject to this limit on the service retirement benefit.² A retiree teaching part-time at a public school district is subject to the cap; the same retiree consulting for a private firm is not.

Who Is Not Subject to the Cap

The statute lists three groups of retirees who can earn unlimited compensation from covered employment:

Anyone who retired before January 2, 2013.
SCRS members who had reached age 62 at retirement, and PORS members who met the corresponding age threshold under their own statute.
Retirees serving in a public office filled by gubernatorial appointment with Senate confirmation, by appointment or election of the General Assembly, or by election of the voters in the jurisdiction.

If you fit any of these, the cap does not apply.¹

Contributions Keep Coming Out

A returning retiree pays the same employee contribution rate as an active member, and the employer pays its normal contribution too. The rates are set annually by PEBA for SCRS and PORS members.³

Those contributions do not buy additional service credit and do not increase the monthly retirement benefit. The statute is explicit on that point. The money supports the pension fund’s solvency; the retiree’s benefit stays frozen at the amount calculated on the original retirement date, and there is no way to recover or redirect the contributions later.¹

There is one path back into active membership. A retiree who stays in covered employment for at least 48 consecutive months and earns at least 75 percent of the average final compensation at retirement may elect to cancel the current retirement allowance, void any optional benefit election, and rejoin as an active contributing member. Prior credited service is restored, and the eventual re-retirement benefit is recalculated using both pre-break and post-break compensation and service.⁴

Different Rules for Disability Retirees

If you retired on disability, the earnings limitation is tighter and reaches further. SCRS disability retirees under age 65, and PORS disability retirees under age 55, must report earnings from any employment to PEBA each year, public or private.²

The cap is not the flat $10,000 that applies to service retirees. Instead, you may earn up to the difference between your adjusted average final compensation at retirement and your annual disability benefit. PEBA adjusts the average final compensation annually for inflation, generally in line with the Consumer Price Index for Wage Earners and Clerical Workers.⁵

Exceed that calculated difference and the monthly disability benefit is reduced or canceled. If you return to a covered employer and your annual earnable compensation equals or exceeds your adjusted average final compensation, the disability benefit ends permanently and you rejoin the system as an active contributing member.⁵

Medical Reexaminations for PORS Disability Retirees

PORS disability retirees under age 55 can be required to undergo medical exams once a year for the first five years after disability retirement and once every three years after that. Refusing an exam can result in the benefit being stopped, and if the refusal continues for a full year, disability retirement rights may be permanently revoked, with only the unexpended portion of accumulated contributions returned.⁶

If a review finds the disability fully removed and earning capacity restored, the benefit may be discontinued. If it finds partial recovery, the benefit may be proportionally reduced. A retiree whose disability benefit was discontinued and who becomes disabled again within five years may apply to have the original benefit restored. After that five-year window closes, disability retirement rights are revoked and the retiree is entitled only to a deferred retirement benefit based on credited service at the time of the original disability retirement.⁶

Your Employer Has to Report the Hire

Employers must notify PEBA when they hire a retired member. If the employer fails to report the hire and the retiree ends up overpaid as a result, the employer is required to reimburse the system for the wrongly paid benefits. Unpaid amounts can be deducted from any state funds otherwise payable to the employer.¹ Even so, the practical effect on you is that any excess payments will eventually be identified and clawed back, so keeping your own count against the $10,000 threshold protects you.⁷

Withholding When Pension and Paycheck Overlap

Two income streams at once means two payers each withholding as if theirs is your only income. The result is usually not enough total tax withheld, and a bill in April.⁸

Two fixes: use the IRS Tax Withholding Estimator at irs.gov/W4App to calculate the right combined withholding, or complete the multiple-income worksheet on Form W-4P and submit it to your pension payer. The estimator tends to be more accurate, especially if the income streams start partway through the year or you have dependents or deductions to account for.⁹

Medicare If You Are 65 or Older

Returning to a job that offers group health coverage changes how Medicare pays. If the employer has 20 or more employees, the group plan pays first and Medicare pays second. If the employer has fewer than 20 employees, Medicare pays first and the group plan is secondary.¹⁰

Retirees who delayed Part B because they had coverage through active employment need to watch the timing when the new job ends. You have an eight-month Special Enrollment Period to add Part B without a late-enrollment penalty. COBRA coverage does not extend that window.¹¹

Social Security Earnings Test

South Carolina’s $10,000 pension cap and the Social Security earnings test are separate limits that can apply at the same time. If you collect Social Security before full retirement age, the federal government withholds benefits when earned income crosses a threshold. For 2026, the annual exempt amount is $24,480 for those under full retirement age all year, with $1 in Social Security benefits withheld for every $2 earned over the limit.¹²

In the year you reach full retirement age, the limit rises to $65,160 and only earnings before your birthday month count. Once you reach full retirement age, the test no longer applies.¹³ The Social Security Fairness Act, signed into law on January 5, 2025, eliminated the Windfall Elimination Provision and the Government Pension Offset. South Carolina public retirees who also qualified for Social Security spousal or survivor benefits previously saw those reduced because of the state pension; that reduction no longer applies to benefits payable for January 2024 and later.¹⁴

1
South Carolina Legislature. South Carolina Code 9-1-1790
2
South Carolina Public Employee Benefit Authority. Returning to Work
3
South Carolina Public Employee Benefit Authority. Contribution Rates
4
South Carolina Legislature. South Carolina Code Title 9 Chapter 11 – Section 9-11-90
5
South Carolina Public Employee Benefit Authority. South Carolina Retirement System Member Handbook
6
South Carolina Legislature. South Carolina Code Title 9 Chapter 11 – Section 9-11-80
7
South Carolina Public Employee Benefit Authority. Working Retirees
8
Internal Revenue Service. Pensions and Annuity Withholding
9
Internal Revenue Service. Form W-4P Withholding Certificate for Periodic Pension or Annuity Payments
10
Centers for Medicare & Medicaid Services. Medicare Secondary Payer
11
Medicare.gov. Working Past 65
12
Social Security Administration. Receiving Benefits While Working
13
Social Security Administration. 2026 Cost-of-Living Adjustment Fact Sheet
14
Social Security Administration. Social Security Fairness Act – Windfall Elimination Provision and Government Pension Offset Update