This blog post was authored by Connie C. Almond
Tracking the latest celebrity marriage can be easier than keeping up with the ever changing restrictions on post-retirement work. As we have previously written about at length, the Legislature has passed numerous bills in the last two years changing the limitations on post-retirement work for PERS retirees performing work for PERS agencies. At the same time, PERS has also amped up its enforcement by penalizing both the employers and the retirees who are “double dipping” in violation of the post-retirement laws.
To avoid restrictions such as the 960 hour cap, “extra help” limitation, and the statutory waiting periods, many agencies hire PERS retirees as independent contractors or consultants, rather than employees. Before PEPRA, PERS would invite employers to send it copies of the consultant agreement so it could determine whether there was a true independent contractor relationship. Employers who claimed that the retirees were working as independent contractors rather than employees often bore some risk because many of the retirees lacked the necessary control over their work to genuinely qualify as independent contractors. Nevertheless, PERS’ procedures allowed for some wiggle room.
As a result of PEPRA’s new limitations on post-retirement work, however, PERS has taken a more stringent position. PERS recently revised its Public Agency & Schools Reference Guide to state that:
“retirees working directly for a CalPERS employer through an independent contractor, consultant or any other contract agreement are subject to the retirement law restrictions for retired annuitant employment.”
This language suggests that PERS will no longer conduct a case-by-case analysis as to whether a PERS retiree is working as an independent contractor or as an employee. Now, even if the retiree is a true independent contractor, the retiree will be subject to the PERS limitations on post-retirement work.
The Guide specifically refers to independent contractors who work “directly” for a PERS agency. Consequently, retirees who perform work for a PERS agency through a third party employer (e.g. a consulting firm) may not be subject to the post-retirement limitations. It will likely not be acceptable unless the third party employer is a legitimate separate employer, rather than the retiree’s sole proprietorship or a small consulting company owned by the retiree. Given the stricter interpretation, however, even those arrangements may not be safe. As always, there can be great value in retaining retirees to perform work, but there are also potential risks. Please contact any of our offices if you have concerns about whether your agency is complying with the post-retirement restrictions.