CalPERS Issues Recommendations to School Employers Regarding Upcoming Retired Annuitant Audit

02.05.2025

CalPERS has announced its intention to begin auditing accounts of CalPERS retirees, referred to as “retired annuitants,” or “RAs” who have returned to work with local educational agencies (“LEAs”) without reinstating from retirement. Accordingly, and for the reasons discussed below, this Alert recommends school employers review their current employment of retired annuitants and adopt a cautious approach when employing retired annuitants.

It is well established that employees who retire under CalPERS are not permitted to return to work for the same or another employer participating in CalPERS unless they have formally reinstated from retirement, or as otherwise authorized by law. (Gov. Code, § 7522.56.)

The statutes governing the employment of retired annuitants under CalPERS include Government Code sections 7522.56, 21221, 21224, and 21229. However, on December 18, 2024, CalPERS issued a Circular which narrowly interprets LEAs’ ability to employ retired annuitants.[1] Based on this Circular and other communications from CalPERS to LEAs, CalPERS’s current position appears to be that only Government Code sections 7522.56 and 21229 apply to LEAs, because these are the only code sections which explicitly reference “school districts” or “school employers.”

Based on this interpretation, the CalPERS Circular identifies only two approved types of post-retirement employment for LEAs:

Under Government (Gov.) Code sections 7522.56 and 21229, RAs can be employed in temporary extra help appointments either during an emergency to prevent the stoppage of public business or because the retired person has specific skills needed to perform work of limited duration.

Significantly, the Circular seems to exclude a category of post-retirement employment – interim appointment to fill vacant positions requiring specialized skills (Government Code section 21221(h)) – which many LEAs have utilized in the past. To further confuse matters, the Circular contains a link to CalPERS’s July 2024 “Public Agency & Schools Reference Guide,”[2] which, at page 153, states that there are “two types of retired annuitant appointments for public agency and school employers: extra help and vacant position.” (Emphasis added.)

Because it appears CalPERS is simultaneously changing prior guidance while also planning to audit for compliance, LEAs are advised to confer with legal counsel and/or to seek written confirmation from CalPERS prior to making any retired annuitant appointments, particularly if the need arises from a vacant position. AALRR notes that the consequences for violating CalPERS statutes and regulations regarding post-retirement employment can be severe for both the retiree and the employer.

We are presuming that CalPERS will also audit for compliance with other rules set forth in the Government Code and described in past CalPERS guidance for employing retired annuitants, including the following:

An extra help employee is a retired annuitant who is appointed to a position which requires special skills for work of a limited duration or is needed during an emergency to prevent stoppage of public business.
A retired annuitant shall not work more than 960 hours during each fiscal year. Even if they work for more than one employer during a fiscal year, or under one or more of the retired annuitant authorizations, the combined number of hours worked for all employers cannot exceed 960 hours.
A retired annuitant shall be paid on an hourly-rate basis, and the hourly pay rate shall be no less than the minimum and no more than the maximum paid to other employees performing comparable duties, as reflected on a publicly available pay schedule, divided by 173.333 to equal an hourly rate. Also, they shall receive no benefits, incentives, compensation in lieu of benefits, or other compensation above the hourly rate.
A retired annuitant is not eligible to be employed if they received unemployment insurance payments for prior work as a retired annuitant within 12 months of the date they would be appointed.
A retired annuitant is not eligible to be employed for 180 days after the date of retirement unless the employer certifies the nature of the employment, that the appointment is necessary to fill a critically needed position, and the appointment has been approved by the employer’s governing body in a public meeting.

CalPERS has indicated it will first audit retired annuitant accounts which have been in place for over four years. The Circular also states: “If we conduct a compliance review and find an RA working in any capacity, be prepared to present adequate documentation that the RA’s appointment complies with these limitations.”

If you have any questions or concerns about the topic of this Alert or responding to CalPERS audits, please do not hesitate to contact your AALRR counsel for clarification and guidance.

[1] The Circular is available at: https://www.calpers.ca.gov/page/employers/policies-and-procedures/circular-letters/200-035-24.

[2] The “Public Agency& Schools Reference Guide” is available at: https://www.calpers.ca.gov/docs/forms-publications/pas-ref-guide.pdf.