August 18, 2016

If you are considering hiring retired annuitants to augment your staff, you should know that the landscape has changed recently. There are some new rules to consider in light of the implementation of the Public Employees Pension Reform Act of 2013 (PEPRA). Liebert, Cassidy, and Whitmore (LCW) recently published a blog that offers some guidance and clarifications related to hiring retired annuitants.

Generally speaking, employees who accept an employment position after retiring must be reinstated into the California Public Employees’ Retirement System (CalPERS). However, there are some exceptions to this rule that allow retired employees to serve in some situations. The process can be complicated, but many public entities find great value in utilizing the institutional knowledge of retired employees for some limited period of time.

This type of work falls within CalPERS’ authority for compliance reviews, and CalPERS recently released a circular letter reminding participating agencies of that fact. The consequences of violating the provisions of the laws governing retired annuitants are serious: employees must reimburse the system for whatever retirement benefits they’d been paid while working inappropriately, and both employers and employees would be required to reimburse CalPERS for the costs they would have paid into the system had the employee been appropriately classified. Administrative costs may also be charged. CalPERS also issued a circular letter detailing the requirements associated with utilizing retired annuitants.

Government Code §21221 and Government Code §21224 outline specific requirements for this type of work. The two differ in terms of the type of position being filled by the retired annuitant and who may make the hire. In §21221, the position is appointed – this is typically used for high-level type positions. §21224 is more general and does not require formal appointment. In both cases, the retired annuitant position cannot be long term and cannot be used to fill a vacant position – it’s for things like covering during a temporary leave by a current employee or in the case of a vacancy where additional help is needed to keep work moving in the short term.

LCW highlights the requirements that hold true for both types of retired annuitants. When hiring retired annuitants in your workforce, please be sure to check the applicable codes for more details.

1. The retired annuitant may only work 960 hours per year across all agencies.

2. Compensation cannot exceed the maximum salary paid to other employees performing comparable duties.

3. The person may not receive any benefits or any type of compensation other than the hourly rate.

4. The position cannot begin sooner the 180 days after the person’s official retirement date, except in certain cases involving critical need like public safety employees.

5. If the retiree is younger than normal retirement age, there must be a true separation in service.

6. The retiree may not have received any unemployment insurance payments for retired annuitant work for any public employer within 12 months.

Appointment-style positions under §21221 (h) have additional requirements:

1. The position may not be open-ended. This is in addition to the firm 960 hour limit.

2. The position must be during a recruitment period for a permanent hire.

3. The governing body must determine that the appointment is necessary to prevent stoppage of public business or requires specialized skills. For counties, this means that the Board of Supervisors must take action.

4. The appointment may only be made once and cannot be extended for any reason.

Retired annuitants under §21224 have fewer rules:

1. The position may not be open-ended. This is in addition to the firm 960 hour limit.

2. The appointing power has to determine that the appointment is necessary to prevent stoppage of public business or requires specialized skills. It may seem like this is identical to the requirement above related to appointed positions under 21222 (h). However, in this case the authority is held by anyone with the power to hire employees, and does not need official action by the governing body or board.

While complicated, there are many reasons counties and other public employers may want to consider hiring retired annuitants. In addition to the Government Codes discussed above, CalPERS has released a guide to the process (while geared towards employees, it is still helpful for listing out rules and regulations).