By Steven Allen Adams | West Virginia Watchdog

CHARLESTON — A bill introduced nearly two weeks ago would close a loophole allowing retired state employees to return to work as contractors while still receiving pension check.

State Sen. Mike Green (D-Raleigh) introduced SB545 on Feb. 08. Green is the only sponsor for the bill, which would close a pension loophole discovered earlier this year.

Under SB545, the State Auditor’s office would be required to match information in its database with the databases of the Consolidated Public Retirement Board and the Department of Administration to identify state retirees who are receiving pension annuities while getting paid as a state employee, a state contractor, or as an employee of a state contractor. If the state retiree is making more than the $15,000 cap, the retiree’s pension annuity would be suspended until they retire again.

If the retiree is violating state law, the State Auditor’s office would notify the retirement board, and also determine if the retiree should be classified as an employee. If the retiree disagrees that they’re acting as a state employee, the CPRB would contact the IRS for a determination.

“The issue is that many of the ‘contract workers’ that are skirting the system would actually be considered employees under the IRS guidelines,” Green said. “The situation is complicated and will require a multifaceted approach.”

Contractors would be required to provide Social Security numbers for any employee who is a state retiree. The State Auditor’s office would keep a public record of all retirees employed full-time by a state agency, including their name, how much the retiree is being paid, the agency paying the retiree, a description of the services provided by the retiree, and the date when the payment was made.

The bill is a response to a report released by the Legislative Auditor’s office in January regarding Joe Smith, the former director of the Division of Personnel and a member of the state Racing Commission. Smith made over $750,000 between 2005 and 2010 from his pension annuity, his Racing Commission pay, and a consulting contract with the Manchin and Tomblin administrations, where Smith was given the same authority as a state employee. His contract was terminated late last year.

West Virginia Code sets a cap on how much a retired state employee can make if they return to work at another state agency or contract with the state. State employees who retire and then seek reemployment on a full-time basis must have their annuity suspended until retiring again. A retiree can return to work on a part-time or legislative per diem basis as long as their income stays below $15,000 per year.

Since releasing the report, the Legislative Auditor’s office identified two employees of the State Development Office who are contractors and exceeding the $15,000 cap, and Phil Weikle, the interim chief operations officer for the West Virginia Health Information Network, was working for Fenwick Technologies, which made $8 million from the state for computer and IT work.

The state paid Fenwick $218,000 per year for Weikle’s service, while he received $36,000 per year in retirement payments. He has since returned to the state’s payroll as a employee.

The Legislative Auditor’s office is trying to determine how many other state retirees are working as contractors for state agencies. The Senate Pensions Committee is taking up SB545 at 1:45 p.m. this afternoon.

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