Key Points

• Effective July 1, 2021, the state law rules regarding break-in-service and hours limitations for hiring public-sector retirees will be reinstated.
• Public sector employers and retirement systems need to determine if any action, such as reinstatement or compliance with required governing agency appointment process, is required to continue to employ retirees who were hired or whose employment was extended during the COVID emergency.

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On June 11, 2021, Governor Newsom issued Executive Order N-08-21, which rescinds waiver of the break-in-service and hours limitation rules applicable to rehiring public sector retirees without suspension of their pension benefits. These requirements were waived by Executive Order N-25-20 (“Prior Order”) to support emergency staffing during the COVID-19 pandemic. The break-in-service and hours limitation requirements will become effective again as of July 1, 2021.

Under the Prior Order, which has been in place since March 12, 2020, certain restrictions regarding employment by California public sector employers of CalPERS retired annuitants, permanent and intermittent personnel, and state management and senior supervisors were suspended, to the extent consistent with applicable federal law. The Prior Order also was interpreted to extend the same relief to county and local governments with respect to rehiring annuitants to assist during the COVID emergency.

The Prior Order suspended the application of reinstatement requirements and work hour limitations in Government Code sections 21220, 21224(a), and 7522.56(b),(d),(f), and (g). This meant that CalPERS and other public sector retirees covered by ’37 Act county retirement systems and independent retirement plans could be rehired during the COVID emergency without reinstatement from retirement (and suspension of their pension benefits), even if the employee worked more than 960 hours (or the applicable hours limitation that would otherwise apply) in a fiscal year, or was rehired within 180 days of their retirement date.

CalPERS clarified in Circular Letter 200-016-20 that the suspension of work hour limitations also may apply to retired annuitants who were hired before the COVID emergency if the employee is redirected for the purpose of ensuring adequate staffing during the COVID emergency. However, the prohibition on any predetermined agreement between an employer and an impending retiree who has not attained normal retirement age continued to remain in effect, consistent with federal law. Other rules related to employment of CalPERS retirees also remained in effect, including that compensation paid to the rehired employee could not exceed the maximum base salary for the position as listed on a publicly available pay schedule, and the employee could not receive any benefit, incentive, compensation in lieu of benefits or other form of compensation in addition to the hourly pay rate.

With the revocation of the relief provided by the Prior Order, public sector employers and retirement systems will need to review and monitor the circumstances surrounding each retiree hired (or whose employment was extended) during the COVID emergency period to determine if any further action is required to comply with the rules applicable to their continued employment. Public sector employers and retirement systems should, beginning July 1, 2021, once again:

• Track hours worked by rehired retirees for compliance with the applicable statutory hours limitations (e.g. 960 hours in a fiscal year for CalPERS); and
• Ensure the 180-day break-in-service requirement is met prior to rehiring a retiree unless an exception applies under another applicable Government Code section(e.g., specialized skills need for limited duration, appointed by hiring agency in public meeting not on consent calendar).

For further information or questions regarding the rules applicable to public sector rehired retirees, please contact a member of the Hanson Bridgett Employee Benefits team.