CalPERS audit found widespread violation of laws meant to curb pension ‘double-dipping’
A CalPERS proposal to limit how many years retirees may work for public agencies while continuing to receive a pension has its origins in a 2019 audit that identified widespread violations of state retirement laws.
The retirement system found violations in the use of retired annuitants at 72% of the 61 local government agencies it audited, according to a copy of the audit CalPERS provided in response to a Public Records Act request.
Two dozen of the agencies didn’t report retired annuitant hires to CalPERS from summer 2014 through summer 2017, according to the audit.
At 32 agencies, retirees worked more than 960 hours per year, the limit for working at a CalPERS agency in retirement, the audit showed.
Retired annuitants who exceeded the 960-hour limit have had to return parts of their pension payments. And the system has taken action to prevent new violations, including automatically monitoring their hours, spokeswoman Amy Morgan said in an email.
The audit also noted 39 agencies that employed retired annuitants for “several years.” That suggested the agencies were running afoul of the law’s requirement that such workers only be used in “limited duration” appointments, such as for emergencies.
CalPERS is crafting new rules that would limit retired annuitant appointments to two years in most cases, with possibilities for extension. CalPERS executives have referenced the 2019 audit as they hashed out specifics of the proposal in meetings.
Public agencies often hire retirees with specialized skills and knowledge to help on a short-term basis with projects like long-running lawsuits or work on highly technical state equipment, such as water infrastructure.
But the arrangements have been exploited over the years by “double-dipping” former public employees who retired as early as age 50 and returned to their former agency at similar pay for similar work while collecting a pension.
Lawmakers have attempted to rein in the abuse by limiting the hours per year retirees may work for CalPERS agencies, prohibiting an immediate return to work and restricting what retirees may do and what they are paid. The restrictions don’t apply to private-sector work or agencies that aren’t part of CalPERS.
The 2019 audit, while covering only a fraction of the 2,900 agencies for which CalPERS provides retirement benefits, suggests many were slow to comply with laws regulating the use of retirees.
Retired annuitant violations
Many of the agencies with violations told CalPERS they were unaware they had to report hours, or that specific employees had been retired. Some said they didn’t know they had retired employees who worked more than 960 hours annually.
When agencies don’t report hours, CalPERS can’t track compliance with the 960-hour rule, according to the audit.
The City and County of San Francisco failed to enroll six retired annuitants in the CalPERS system during the three-year audit period, according to the report.
Auditors found a retiree who worked 1,016 hours in fiscal year 2014-2015, then left and was rehired as a full-time employee in another division of the agency.
No one notified CalPERS, and the retiree went on to work for a total of 1,828 hours in the following fiscal year while remaining retired in CalPERS’ system. The employee worked similar hours the next two years.
The division that hired the retiree was “unaware” of their status, according to the audit. The agency hadn’t checked with CalPERS since the City and County of San Francisco started enrolling new employees in the San Francisco Employees’ Retirement System in 2012, according to the audit.
Four of the retirees worked for “several years,” suggesting the agency might be violating the law’s “limited duration” restriction according to the audit. It doesn’t say how many years the retired annuitants worked for the county.
When The Bee asked San Francisco’s Office of the City Administrator about the audit last week, the office referred the request to the San Francisco Employees’ Retirement System. The retirement system said in an email that it didn’t have any information about CalPERS retirees.
Monterey County did not enroll and report hours for nine retired annuitants in the audit period, according to the audit. Two other retired annuitants worked more than 960 hours per year, according to the audit.
The agency told auditors it had misclassified some of the retirees as temporary employees and attributed the extra hours for the two properly classified retired annuitants to other mistakes.
Additionally, three retired annuitants worked for “several years,” auditors found.
A Monterey County spokesman did not respond to questions about the audit.
Automatic tracking
Morgan, the CalPERS spokeswoman, said each of the audit findings has been “resolved,” but that auditors have not followed up at the agencies.
“However, with our increased compliance and system-triggered monitoring we have more monitoring in place now than when this audit was originally conducted,” Morgan said in an email.
The system now automatically tracks retired annuitants’ hours and their start dates, and investigates complaints brought through an ethics hotline, she said.
In 2018, a new law took effect that fines employers if they don’t report retired annuitants’ hours, she said.
CalPERS has also increased communication with employers and employees before and during retired annuitant appointments, including automated warnings to those who reach 600 and 700 hours, she said.
“We have seen a significant increase in communication with employers and retirees to ensure post-retirement employment is in compliance,” she said.
This story was originally published May 10, 2022 at 4:55 AM with the headline "CalPERS audit found widespread violation of laws meant to curb pension ‘double-dipping’."