CalPERS Advises Public Agencies on 960-Hour Work Limit for Retirees

The California Public Employees’ Retirement System (CalPERS) on Thursday distributed a memorandum to all public agencies regarding the employment of retired annuitants.

Assembly Bill 1028 (Chapter No. 440, Statutes of 2011), clarifies existing public employment law, specifically regarding the requirement that a public agency retiree cannot work for a state or public employer for more than 960 hours per fiscal year without being reinstated from retirement. The bill, effective January 1, 2012, amended current law to clarify that:

• The 960-hour limit applies to retirees employed as temporary “extra help” (which the bill defines as occurring during an emergency to prevent the stoppage of public business or to perform temporary work).
• Retirees appointed as temporary extra help, even if the work hours won’t exceed 960, should not be appointed to any vacant permanent part-time, permanent intermittent, or permanent full-time positions.
• Retirees employed as temporary extra help should have specialized skills (determined by employer) and can work for more than one fiscal year for the same employer only if the employment is temporary extra help.
• Retirees may be appointed by the governing body of a CalPERS-contracting agency as an interim appointment to a vacant position during recruitment for a permanent replacement.
• The interim appointment is limited to 12 months from the appointment date (with or without an extension to work beyond the 960-hour limit).

The CalPERS memo also reminds public agencies that the 960-hour maximum includes when a retiree works for more than one CalPERS employer during a fiscal year and that the retiree’s rate of pay must not exceed what is normally paid for that position.

Legislative Committee on Pension Reform Holds Meeting in Sacramento

The Conference Committee on Public Employee Pensions held its third meeting Wednesday in Sacramento to review Governor Brown’s proposal to create a mandatory hybrid pension plan for new employees.

Counties will recall that AB 340, by Assembly Member Warren Furutani, was amended last September to state legislative intent to convene a conference committee for the purpose of crafting comprehensive pension reform legislation. The Committee, made up of Assembly Members Michael Allen, Warren Furutani (Chair) and Beth Gaines and Senators Gloria Negrete-McLeod, Joseph Simitian and Mimi Walters, first met on October 26 in an informational hearing to address the current condition of public employee benefits and reform efforts. The Committee met again in another informational hearing on December 1 to discuss in detailGovernor Brown’s pension reform plan. Eraina Ortega testified at both hearings on behalf of CSAC.

In Wednesday’s hearing, Keith Brainard, research director for the National Association of State Retirement Administrators, stated the most important elements of a hybrid retirement plan that would promote the objectives of stakeholders (employers, plan participants and taxpayers):

• Mandatory plan participation
• Pooling of assets
• Cost-sharing between employers and employees
• Including benefits that cannot be outlived

Brainard additionally advised the Committee that any statewide hybrid plan should be easily understood by all involved and the plan itself, once designed, should be “left alone” rather than changed in a piecemeal manner that creates confusion.

A representative from the National Institute on Retirement Systems, Diane Oakley, explained the federal employees’ hybrid retirement system; finally, Ed Derman, Deputy Chief Executive Officer for the California State Teachers’ Retirement System (STRS), gave the Committee an overview and history of that system and suggested that the state should strongly consider a “cash balance” version of a hybrid plan (STRS operates this type of plan for extra work beyond the school year such as coaching or summer school, a participant’s cash balance account is credited with the extra pay which earns interest at a more conservative rate than the overall STRS fund; if a participant leaves service prior to retirement age, he or she may take the contents of the cash balance plan as a lump sum and roll it into an IRA). STRS argues this type of plas s better for the financial security of the employee, contains little additional risk for the employer, and is cheaper to operate because those funds are invested with the STRS trust fund.

The Committee heard testimony but did not take action on the Governor’s or any other pension reform proposal The committee indicated they would meet again in one month.