Employers who may seek to employ a CalPERS retiree to fill a particular need should keep an eye on the move-counter move strategy that is in play in Sacramento.  It appears that the legislature may have taken issue with the latest CalPERS Circular Letter providing guidance to employers in determining whether or not it is permissible to employ a retired annuitant under various circumstances.

As background, the Public Employees’ Retirement Law (the “PERL”) regulates post-retirement employment of CalPERS retired annuitants at Government Code section 21220, et seq.  Government Code 21220 prohibits public entities from employing CalPERS retirees unless a statutory exception applies.  (For exceptions, see Gov. Code, sections 21221(h), 21224, and 21229.)  

The Public Employees’ Pension Reform Act of 2013 (the “PEPRA”) took effect on January 1, 2013.  PEPRA added further restrictions on the post-retirement employment of CalPERS annuitants.  Where there is a conflict, provisions in the PEPRA prevail over the PERL.  However, it was unclear whether some provisions of the PERL were in conflict with the PEPRA and whether or not the provisions in the PERL continued to be valid.

CalPERS issued Circular Letter No. 200-002-14 on January 14, 2013, and we published our summary analysis of the Circular Letter on January 17, 2014.  We reported that it had been unclear if PEPRA and Government Code section 21221(h) were in conflict.  (Section 21221(h) permits a governing body to appoint a retiree to fill a vacant position on an interim basis during recruitment for a permanent appointment.)  However, CalPERS provided guidance in the Circular Letter indicating its interpretation that section 21221(h) remained valid after PEPRA.  Glad to have that clarified, but maybe not for long…

Just a month later on February 20, 2014, Senator Norma Torres, the Chair of the Senate Public Employment and Retirement Committee, introduced Senate Bill 1219.  SB 1219 is written to repeal Government Code sections 21220 et seq. and replace the section with new provisions that conform to the requirements of the PEPRA.  In particular, the new provisions omit the language in section 21221(h) that permits governing body appointment of retirees on an interim basis during recruitment for a permanent replacement.  Rather, the proposed new provisions would permit employment of a retiree during an emergency to prevent stoppage of public business or because the retired person has skills needed to perform work of limited duration.  This language mirrors the language in Government Code sections 21224 and 21229, which CalPERS has interpreted to prohibit hiring a retiree to fill any vacant position.  Rather, under CalPERS interpretation, this language has permitted employment of a retiree only to perform work in the nature of “extra help.”

We will keep a close watch on SB 1219 and any other legislation or further guidance from CalPERS that may impact the authority of employers to hire CalPERS retirees.