A local agency employee retires and begins receiving a pension from the California Public Employees Retirement System (PERS) and is then offered part-time employment with the old employer because economically motivated layoffs had left the old department short-handed.  What obstacles and limitations do the agency and the retired employee face in this situation?

The PERS statutes contain an entire chapter on employment after retirement (beginning at Government Code section 21220.)  There are two specific provisions in that chapter which relate to this subject.  One of those (section 21221(g) and (h)) deals with employees brought back by a City Council, Board of Supervisors or other governing body.  These are positions which report directly to the governing body such as a City Manager.  The second provision (section 21224) applies to those positions appointed by an “appointing power” such as a City Manager, Executive Director or Superintendent. 

While these provisions have a great deal of similarity, there are a few significant differences.  Both allow retirees to return to work on a basis limited to 960 hours in a fiscal year.  The most significant difference between these two provisions is the permissible duration of the appointment.  For those appointments made by the governing body (section 21221) the appointment may not exceed one year unless specific permission for an additional year is granted by PERS.  Section 21224 does not have the specific one year limitation but only allows the appointment if the retiree has special skills or is needed in an emergency.  However, the appointment is allowed only for “a limited duration.”  Neither PERS nor any court has defined the term “limited duration” as it appears in section 21224.  However, caution would dictate that “limited duration” is not a synonym for “indefinitely.”  We have advised agencies that these appointments should be limited to one fiscal year or, if the agency can establish a specific need for extending the retiree’s services two years. 

Employment beyond the maximum limits set in the Government Code can have consequences.  Both the retiree and the employing agency can be required to repay PERS for any excess amount of pension benefits received while the retiree was reemployed.  In a worst case scenario, PERS could declare the retirement null and void and cancel the individual’s pension checks.  See Government Code section 21220.

We understand that some agency representatives have telephoned PERS staff to obtain oral opinions on questions such as these and some have received oral advice at variance with the views set forth above.  Our experience is that PERS will not necessarily stand behind oral opinions given by staff members.  PERS has been known to change its view on issues of statutory construction and will only recognize and follow interpretations set forth by courts, PERS regulations or its own interpretative bulletins.  In our view, any agency that relies on oral advice received from PERS staffers by phone does so at its own peril. 

We also suspect that employment of retirees beyond the limits set forth in the Code has often escaped detection.  An agency that relies upon a suspicion that PERS will not detect excessive employment of retirees also acts at its own peril.  PERS can require, and has required, both retirees and agencies to repay money.  There are a number of ways that PERS can be alerted to potential violations of the Code.  PERS conducts random audits of agencies and also receives “tip-offs” by phone calls from members of the public and newspapers.

We recommend that all PERS contractor agencies who employ PERS retirees examine their practices to ensure that they are not risking liability for exceeding the limits set forth in the Government Code on employment after retirement.