New CalPERS rule limits how long retirees can work while drawing a pension

The CalPERS Board of Administration approved new restrictions Tuesday on how long retired public employees may work without giving up pension payments.

The board set an initial two-year limit, plus extensions, on retired annuitant appointments. The appointments allow retirees to earn paychecks for up to 960 hours of work per year from employers who participate in CalPERS.

The new regulation addresses an ambiguity in California retirement law, which says retirees may return to work for a “limited duration” in emergencies and when employers need retirees’ specialized skills. Some retirees’ appointments have lasted decades, according to data from a 2019 CalPERS audit.

The regulation allows local governments and the State of California to seek up to two one-year extensions after the initial two years is up, and then allows them to apply for exemptions that could extend the appointments indefinitely.

The regulation will undergo another 15-day public comment period and could be tweaked further before proceeding to the Office of Administrative Law for additional review.

CalPERS also is applying the new definition of limited duration to out-of-class assignments, in which employees temporarily fill higher-paid roles and may receive larger pensions as a result.

Lengthy retired annuitant appointments have irked public employee unions, who say the work should be done by active employees. The state attorneys’ union recently sued the state Human Resources Department over the appointments, saying the department hasn’t enforced the limited duration rule.

Pat Whalen, an attorney who filed the lawsuit on the union’s behalf, took issue in public comments to the board on Tuesday with the exceptions allowed under the new regulation.

“You’re defining limited duration with a rule that allows it to go forever,” Whalen told the board.

CalHR director Eraina Ortega, who is a CalPERS board member, has said departments often rely on the annuitants to provide limited help with things like long-running lawsuits or highly technical water projects and to bolster workforces in rural parts of the state where hiring is difficult.

The appointments tend to be easier for departments than hiring new employees, and they can be cheaper, since employers must make pension contributions on behalf of active employees but not on behalf of retired annuitants.

The new regulation is expected to take effect next summer or fall, said employer account management division chief Renee Ostrander.

Retired annuitants who are working then will have two years from the time the regulation goes into effect before they must seek an extension.

CalPERS’ limits on working after retirement, including the new regulation, apply only to jobs with public employers that contract with CalPERS for their retirement benefits. They don’t apply to work for private employers or public agencies that don’t participate in CalPERS.

This story was originally published November 16, 2022 at 5:30 AM.