Retiree_Working.jpgIn an effort to keep public employers and retirees confused, the Legislature made more changes to the limitations of post-retirement employment for retirees of the California Public Employees’ Retirement System (“PERS”).  This is the second change to go into effect in less than six months.  Senate Bill 1021, passed by the Legislature on June 28, 2012, and which took effect immediately, will primarily impact the compensation received by PERS’ annuitants when working for PERS employers, but will also make some changes to the length of employment for a certain type of post-retirement appointment.

In two of our previous blog posts, we commented on Assembly Bill 1028 which took effect on January 1, 2012, as well as a PERS’ circular letter providing guidance on the same.  AB 1028 was not so much “new law” as a clarification of the long standing rules against receiving a PERS retirement allowance while employed by a PERS employer.  In particular, AB 1028 emphasized that a PERS annuitant appointed by the governing body of a PERS agency to a high-ranking position (e.g. interim City Manager, Police Chief, etc.) under Government Code section 21221(h) could not, under any circumstances, work for more than one year.  The same annuitant could also not work more than 960 hours in a fiscal year unless an application was made to PERS to exceed 960 hours.  AB 1028 also added the word “temporary” to Government Code sections 21224 and 21229 to emphasize that employment of a PERS retiree is intended to be for a short period of time, although the statutes had long stated that retirees appointed pursuant to these sections must perform work of “limited duration.” 

Now comes SB 1021, a comprehensive bill that made a plethora of changes to statutes ranging from public safety, Department of Corrections, sentencing guidelines, and mental health.  Buried within the bill come further changes to Government Code sections 21221(h), 21224, and 21229.  One of the most significant changes made to all three of these statutes is that the compensation received by the PERS retiree from employment with a PERS employer may not exceed the maximum monthly base salary paid to other employees performing comparable duties as listed on a publicly available pay schedule for the vacant position divided by 173.333 to equal an hourly rate.  The PERS retiree also may not receive any benefits, incentives, compensation in lieu of benefits, or any other forms of compensation in addition to the hourly rate.

SB 1021 also makes substantial changes to Government Code section 21221(h) which governs PERS retirees appointed by the governing body of a PERS agency to high level positions during recruitment for a permanent appointment to that position.  In particular, while it continues to state that the PERS annuitant may not work more than 960 hours in a fiscal year for all PERS employers combined, it eliminates that employer’s ability to request an extension of those 960 hours from PERS.  In addition, it eliminates the requirement that any appointment pursuant to section 21221(h) must not exceed one year.   Therefore, while section 21221(h) still requires that appointments pursuant to this section are to be on an “interim” basis while the agency is actively recruiting to permanently fill the vacant position, the appointment may exceed one year, but in no event shall it exceed 960 hours in each fiscal year.

SB 1021 makes no other changes to Government Code sections 21224 and 21229 except to eliminate the word “temporary” from the sentence that reads, “A retired person  may serve without reinstatement from retirement or loss or interruption of benefits provided by this system upon temporary appointment…”  The word “temporary” first appeared only six months ago in AB 1028 and by elimination only six months later, “temporary” was apparently only temporary. But elimination of this word should not be read to indicate any change to the law.  Both before and after AB 1028, and even after SB 1021, the statue still reads that employment of a PERS retiree by a PERS employer pursuant to sections 21224 and 21229 must be either: (1) during an emergency to prevent stoppage of public business; or (2) because the retired person has specialized skills needed in performing work of limited duration.  Thus, removal of “temporary” is no monumental shift in what we have long understood to mean that a PERS annuitant cannot be employed to fill a regular full-time, part-time, seasonal, or intermittent position and work year-after-year even when not exceeding 960 hours in a fiscal year.  PERS annuitants must still only be used for emergencies or to perform work of limited duration.

It is not clear when or if PERS will issue a new Circular Letter modifying its position that retirees appointed under sections 21224 or 21229 may only perform “extra help” work.  PERS identified this work as “elimination of backlog, special projects, work in excess of what the employer’s regular employees can do, etc.”  While we are not expecting PERS to change its position, we will let you know as soon as any new guidance is issued.

These statutes are not to be taken lightly.  These limits on post-retirement employment are not crafted arbitrarily, but stem, in part, from the Internal Revenue Code and Regulations against “in-service distributions” from a qualifying pension plan.  PERS employers and PERS annuitants alike are cautioned to limit post-retirement employment and not to fall into the trap of thinking that the post-retirement employment is permissible so long as the annuitant does not exceed 960 hours in a fiscal year.  PERS annuitants and employers have seen the repercussions of this fallacy both before and after AB 1028 and will continue to do so even after SB 1021.  When in doubt, seek legal advice on post-retirement employment.