Given all the recent public employee pension reform changes to absorb, it is not surprising that part-time employees of CalPERS contracting agencies have received little attention. After all, part-time employees are excluded from CalPERS membership, right? While that might be the general rule, the exceptions practically swallow the rule. Your agency needs to be aware of the exceptions to avoid very expensive and time-consuming problems.
Government Code section 20305 sets out the various thresholds that must be reached before a part-time employee must be enrolled as a member in CalPERS. The general rule is that permanent employees who work in a position requiring less than 20 hours per week on average are not eligible for membership (unless your agency amends its CalPERS contract to enroll part-time employees). Easy enough. However, another basic rule is that once an employee is a CalPERS member, he or she remains a CalPERS member, even if they switch employers and/or their status changes from full-time to less than 20 hours per week. As a result, it is essential that any applicant for part-time employment be asked if they are a CalPERS member. If they are, and they are hired, they must be enrolled as a CalPERS member from the first day of employment.
Another trap is the 1,000 hour per fiscal year rule. Once a part-time employee works 1,000 hours in a fiscal year, he or she must be enrolled as a member. Combining this rule with the first one, that “once a member, always a member,” a part-time employee that works 1,000 hours in one fiscal year and never meets that threshold again, must nonetheless continue to be enrolled.
Failure to enroll an eligible employee timely can result in a $500 penalty. In addition to paying employer contributions on the part-time employee’s salary, the employer may also be required to pay the employee contribution. Since there is no statute of limitations on when an employee (or CalPERS) can pursue retroactive enrollment, it is not uncommon for requests for membership to be made by former employees years after they stopped working for the agency. Dealing with that problem can be an administrative nightmare since the employer likely no longer has records of the employees’ salaries. This is especially true when temporary agency workers or independent contractors are determined to be agency employees. In those cases, merely determining the correct salary to report to CalPERS as compensation can be a challenge.
Government Code section 20305 has several other thresholds for enrolling employees. Not all can be addressed in one blog post. However, your agency needs to be aware of the rules and comply. Since there is no statute of limitations, the problem never really goes away.