A veteran teacher reaches retirement age but wants to keep working. Her school district wants her experience but not all the higher costs that come with her level of experience.

Letting her retire and then come back to work a month later seems like a win-win. She can draw her earned pension check, along with a salary, while the school district can stop paying into the pension fund.

Such a scenario has been allowed in Indiana - technically. But these quickie retirements - for whatever reason - will no longer be allowed after the state closes a loophole this week.

Critics say the practice amounts to double-dipping and disadvantages young people who are just beginning their careers. Taxpayer money pays into the retirement fund; when those public employees are rehired and begin drawing their pension checks, they're also receiving a taxpayer-funded salary.

But school administrators argue it allows schools or other public employers to retain experienced people and save the money on an already tight budget they would pay normally into the pension fund.

A provision in House Bill 1546 that takes effect Friday will prevent a government employee from retiring and being rehired as part of an agreed-upon deal.

The new state law requires members to have a bona fide separation during retirement - no handshake or written agreements with employers.

The Teachers' Retirement Fund cannot say how big a problem this has been, because it does not keep track of how often such deals are made.

"We have no idea," said Molly Deuberry, spokeswoman for the Indiana State Teachers' Retirement Fund. "We only keep track of who is paying into the pension."

Neither does the Indiana Public Employees' Retirement Fund know how many government employees have benefited from retire-rehire deals.

The Public Employees' Retirement Fund offers pre-retirement workshops around the state, and the question has come up frequently, said Jeffrey Hutson, spokesman for the fund.

"People ask, 'Is this something we can do?' " he said.

Hutson said his organization has cautioned workers against retire-rehire arrangements for a number of years, because a federal law already prohibits such deals. The new state law reflects what already exists at the federal level, he said.

For PERF to continue as a tax-qualifying pension plan, the laws had to be brought in line.

"It puts the plan at risk for all the members," Hutson said.

Krista Stockman, spokeswoman for Fort Wayne Community Schools, said northeast Indiana's largest school district has not encouraged retire-rehire situations.

"I can't say that it's never happened, but it's not our practice to participate in this," she said.

‘Budget enhancer’

Just last year, Indiana shortened from 90 days to 30 days the length of time a public employee had to be separated from his or her job in order to receive retirement benefits.

Many school districts took this as endorsement - even streamlining - of the retire-rehire agreements, and the state did little to discourage those actions, said H. Steve Sprunger, superintendent at East Noble School Corp. East Noble chose to retire, then rehire, seven administrators during a board meeting last year, Sprunger said.

An assistant superintendent, several principals and an activities director all retired in June 2008 and were re-employed in July 2008 - in line with state law at the time. Sprunger said he believes his school district violated neither the letter nor the spirit of the law.

He called the move a "budget enhancer" and estimated it saved the school corporation about $50,000.

"It was not big money," he said.

The main reason for the deal, he said, was to keep talented people within the school corporation.

Teachers and administrators can work in another state but still receive Indiana retirement funds. That's a big draw for people in northeast Indiana, who live near the Michigan and Ohio lines.

Offering the retire-rehire option gave those experienced administrators the opportunity to stay within the school district, Sprunger said.

"That's one of the fears I have, is we're going to go back to losing some top people," he said.

East Noble joined other Indiana school districts who took advantage of the loophole as recently as this summer.

This month, the Star-Press in Muncie reported school administrators in east-central Indiana had approved retire-rehire deals before the law takes effect. And the Times of Northwest Indiana has reported that more than a dozen teachers and administrators in the area had taken 30-day retirements or shown an interest in doing so.

aturner@jg.net