These retirees took part-time jobs. Now CalPERS is demanding $400K in pension clawbacks

A decision by Tarlochan Sandhu to seek part-time work as a local government consultant while collecting his pension from the California Employees’ Retirement System will likely cost him at least $52,000.

Sandhu, 66, is one of five retirees who the California Public Employees’ Retirement System is demanding return pension payments they received while working part-time for several municipalities. One of them owes $238,000.

All five of them believed they were complying with regulations that restrict when California government retirees can work for an agency that pays CalPERS benefits. The reason: they were placed and paid by a third party organization called Regional Government Services.

Sandhu said he was told by RGS employees that he was “playing by the rules” by working as a consultant through the agency instead of directly contracting with a city.

But CalPERS maintains that the retirees were working in paid jobs under the direction of local government leaders. To CalPERS, that means the retirees should not have been taking their pensions while they held their consulting jobs.

In addition to returning pension money, Sandhu and the four other retirees will also be forced to re-enroll as CalPERS beneficiaries, forfeiting cost of living increases of up to 10% in a proposed settlement. They will be required to pay CalPERS employee contributions for their work in their post-employment jobs.

The CalPERS board unanimously found that the employees were in violation of post-retirement rules at its meeting on Wednesday. CalPERS said the retirees need to pay back around $400,000, the money they received in pension benefits while working in their prohibited jobs.

Attorney Scott Kivel, who represents the five individuals charged by CalPERS, said he expects to appeal the matter to Sacramento County Superior Court.

State Administrative Law Judge Coren Wong had said in separate decisions that the municipalities’ contracts with RGS “was subterfuge to hide the fact” that the employees were actually employed by the municipalities.

RGS of Carmel Valley is a joint powers authority that provides consultants and administrative services to local governments in California.

CalPERS General Counsel Matthew Jacobs said in a statement to The Sacramento Bee that the administrative law judge made the right decision. He said that the RGS’s employment of the five individuals was a deliberate effort to get around the post-employment work rules.

Jacobs said whether the retirees will be required to repay “some of the improper benefits they received,” is not an issue in the case.

He said if the retirees are required to repay they should look to RGS for compensation.

RGS Deputy for Client Services Sophie Selivanoff said her agency is not “evil lawbreakers” as CalPERS has portrayed. She said it was formed to help municipalities, not break CalPERS post-employment rules.

CalPERS rules generally prohibit retirees from working for an entity participating in the pension system’s benefit program but acting as a consultant under 960 hours a year is considered an exception.

Part-time work in retirement

Sandhu said he thought he would make some extra money, having retired as financial accounting director with the Santa Clara Valley Transportation Authority in 2011.

“I was bored. I wanted to keep myself busy,” said Sandhu,who worked part-time for the cities of Capitola, Alameda, Los Altos Hills and Union City, performing finance director duties in 2015 and 2016. “I had no idea CalPERS was going to penalize me. Paying the money will have a big financial impact on my life.”

The Fremont resident won’t be making the biggest payment.

CalPERS has proposed assessing Margaret Souza more than $238,000 for her part-time, one to two days a week work as the interim financial director in the city of Hughson in Stanislaus County from November 2012 until July 2015, retirement system documents show.

Souza retired as finance manager from the city of Patterson in 2010.

Former Hughson City Manager Bryan Whitemyer said Souza is a hero for agreeing to help this small community of 8,000 avoid bankruptcy in the years following the financial crisis.

Whitemyer said Hughson had already laid off nearly half of its 27 employees and needed someone to work part-time on the city’s budget.

He said Souza and a second retired employee, Linda Abid-Cummings, who served as part-time administrative services director for Hughson, helped repair the city’s financial books.

CalPERS is also seeking around $47,000 from Abid-Cummings, who retired in 2011 from the city of Riverbank.

“The tragedy in this decision is the individuals helped the city of Hughson become solvent so we could continue to pay CalPERS premiums,” Whitemyer said. “Yet, these individuals are being penalized. It just doesn’t make sense to me.”

Payback to CalPERS presents financial hardships

Souza’s attorney Kivel said his client made significantly less than the amount she is being forced to pay back and CalPERs has refused to offer an explanation,

He said the payback would be a major problem for the retired woman.

“The result would be disastrous for Ms. Souza,” he said. “She is now advanced in age and cannot obtain a meaningful comparable position that would provide her with income to pay this debt to CalPERS.”

In one case, one of the pensioners CalPERS is demanding repayment from is dead. Douglas Breeze died several months ago, meaning that his widow would be forced to make a potential payment of around $9,500.

Breeze worked for the city of Atascadero part-time in 2013 and 2014 performing public works executive duties at a rate of $750 a day. He took the job after the city’s public works director had retired. Breeze himself had retired in 2007 from the public works director position in the city of Ojai

A fifth employee, David Dowswell, who worked as community services director for the city of Dixon, is only being cited for less than a three-month period from April 28 to July 1, 2015 for violating post-retirement employment rules. He is being asked to return around $11,000.

Sandhu, who helps support two grown children and his wife, said giving CalPERS back the $52,000, would be a major financial hardship.

He said his $66,000 a year CalPERS retirement benefit is his primary source of income.

And this time he is not looking for any more part-time jobs.

“I am too old to work again,” he said.

This story was originally published November 17, 2021 at 5:25 AM.