CalPERS retirees could face new limits on part-time work under proposed pension rule

The California Public Employees’ Retirement System is considering new limits on retirees who return to work for public agencies.

A proposal before the CalPERS Board of Administration would put a two-year limit on “retired annuitant” appointments — which allow retirees to collect both a government paycheck and a pension — but would allow extensions in some circumstances.

Public agencies often hire retirees to perform specialized work on a limited basis. Examples include attorneys or auditors who come back to help with long-running cases or engineers who work on highly technical water projects, California Human Resources Department Director Eraina Ortega, a CalPERS board member, told the pension board in September.

But retirees and public agencies have sometimes abused the arrangements, as in the recently publicized case of a small police district outside San Francisco, where a former chief allegedly earned more than $6,000 per two-week pay period while receiving a pension, among other alleged abuses.

The California State Legislature and CalPERS over the years have tightened retired annuitant rules to prevent abuse — including prohibiting retirees from working more than 960 hours per year without suspending their pensions — but the law remains vague on how long they may keep working.

The two-year proposal was introduced in September. It’s been tweaked to add extensions based on concerns from Ortega and from the State Controller’s Office, which depends on retired annuitants, according to meeting transcripts.

Under the latest version, once the initial two-year appointment for a retired annuitant ends, public agencies could seek up to two one-year extensions. The agencies would need to demonstrate to CalPERS that the retiree’s work couldn’t be done by a regular employee.

Agencies could seek additional year-long extensions after that, but would need to certify they tried to recruit a new employee for the work and failed. Or agencies could seek one-time, permanent extensions for retired annuitants who work no more than 120 hours per year.

The restrictions on retired annuitants apply only to former public employees returning to work at agencies covered by CalPERS. They don’t apply to CalPERS retirees taking private-sector jobs or working for public agencies that don’t contract with CalPERS for pension benefits.

Ortega said some retired annuitants, such as attorneys, perform only a few hours of work per year, but their expertise is often needed for many years in long-running cases.

In addition, she told a board committee in March, “there are some professions and there are some rural areas where the actual workforce is quite limited, and those departments, I think, need some ability to be able to seek an exemption from the restriction.”

California union on annuitant rules

Terry Brennand, a lobbyist for SEIU California, is skeptical of the need for lengthy retired annuitant appointments. Brennand has told the board that public agencies should be able to hire regular employees for any work they need done well before four years have passed.

“The only time this is used is for the most highly compensated, privileged public servants we know about,” he said. “And it sort of exacerbates this theme of double dipping.”

Anthony Suine, CalPERS’ deputy executive officer for customer services and support, told the board in September that the push to limited retired annuitant appointments was based on a 2019 audit.

State law says only that retired annuitant appointments shall be of “limited duration,” a vague and subjective term, Suine told the board.

When The Sacramento Bee asked for the audit, CalPERS spokesman Joe DeAnda said Suine was referencing an informal, internal review of the limited term appointments, not a formal completed audit.

From 2009 through 2019, 53% of retired annuitants finished their appointments within 24 months, according to a CalPERS board information item. Another 22% worked for up to 48 months after retiring. A quarter of retired annuitants worked longer than that. CalPERS board materials don’t say for how long.

DeAnda on Thursday declined to provide the numbers that correlate with the percentages or information about the longest-term appointments.

When CalPERS members retire

Most state employees leave public service at the age their full retirement benefits become available, between age 55 and 62 in most cases depending on their field of work and other factors.

Retirees in most instances must wait 180 days after retirement to become a retired annuitant, and they can’t earn more than a regular employee in the job. Retirees who want to work more than 960 hours per year must reinstate as a regular employee and stop receiving pension checks.

Gov. Gavin Newsom temporarily suspended many of the restrictions on retired annuitants during the pandemic.

If a CalPERS board committee approves the proposal Monday, the full board would vote on it. Then the proposal would go to the Office of Administrative Law, be posted for public comment for 45 days and then would return to the board for further review.

This story was originally published April 18, 2022 at 5:25 AM.