CalPERS backs down after seven years of conflict with retirees – CalMatters

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On Tuesday, CalPERS dropped a seven-year legal battle to recover hundreds of thousands of dollars from four retirees the fund accused of violating post-retirement work rules.

The end of this saga is important not only for pensioners, who no longer face “scandalous” payment demands from your pension fund but also for cities turning to former government employees as part-time workers to cover short-term staffing needs.

At one point, CalPERS adjusted retirees’ incomes in such a way that they lost a monthly income. Thanks to the settlement, they will receive what they are entitled to at their original retirement dates.

The four retirees “returned to the status they were entitled to seven years ago,” said Scott Kivell, the attorney who represented them in multiple court and administrative hearings. “It wasn’t really a deal. CalPERS backed down and said it would give everything to my clients.”

The case is from 2018, when CalPERS started checking five pensioners who worked for Regional Government Services, a company that provides consultants and independent contractors to local government agencies. Each of the retirees had started working for the company, which distributed them to different cities.

CalPERS auditors found that the retirees performed work under the direction of municipal supervisors and acted more like local government employees than independent contractors reporting to a private company.

This is a violation of California retirement law, which strictly limits the number of hours retirees can work for state agencies that provide benefits through the California Public Employees’ Retirement System.

While CalPERS was evaluating the retirees, it sent them letters stating that they incorrectly received their retirement income and that their retirement dates would be adjusted to the date they stopped working for the regional state offices, rather than the date they left state service.

In 2022, a retiree, Margaret Sousa, received a “late payment” notice from CalPERS informing her that she had been overpaid by $846,292.

Another beneficiary, Tarlochan Sandhu, received a notice from CalPERS in February 2022 informing him that he owed $454,474.

David Dawswell received a late payment notice showing he owes $664,289.

And Douglas Breese’s widow received a notice that she owes $36,192.

Overall, CalPERS’ decision that retirees were in conflict with state law was upheld in court. CalPERS lost only one case, when five employees sued the fund. It was Linda Abid-Cummings who won her case in Sacramento Superior Court, as reported by The Sacramento Bee.

Last year, the Third Court of Appeal ruled that CalPERS was vindicated determining that Sandhu’s work for regional government offices violated California retirement law.

However, a more recent ruling by an administrative law judge focused on the penalties and restitution that CalPERS sought to impose. It found that the fund breached a three-year statute of limitations on the look-back period in which it could seek reimbursement for violations of the retirement law.

For example, CalPERS’ review of Souza’s case dates back to 2011. In February 2022, it sent him a “late payment notice” detailing the massive overpayment.

Souza and the others received follow-up letters demanding smaller amounts, a practice that the administrative law judge Juliet Cox was criticized for her decision in January.

“CalPERS officials sent conflicting requests, in some cases for exorbitant amounts, to Sandu, Souza, Dowswell and Breese’s widow. Their communications were riddled with errors and unclear,” Cox wrote.

CalPERS did not immediately accept Cox’s decision. Her staff wrote to the CalPERS Board of Directors with a recommendation to overrule Cox’s decision and remands the case for a new administrative hearing.

But just before the board voted on that recommendation, CalPERS reached a settlement with employees and the cities that contract with the Regional Government Services Authority.

Regional Government Services Executive Director Sofia Selivanov urged the CalPERS board at its meeting to go further and declare Cox’s decision a “precedent decision,” a formality she said would emphasize that CalPERS must abide by the three-year statute of limitations when investigating pension law violations and recalculating benefits.

The Board did not take this action. After the meeting, CalPERS officials said in writing that the terms of the settlement would prevent Cox from setting a precedent.

“We disagree with certain features in Administrative Judge Cox’s proposed decision,” CalPERS officials said. “CalPERS employees work diligently to help members by always striving to provide accurate and clear information, and they did so in this case.”

Selivanov explained to the board that retirees who are willing to work part-time need clear and precise guidance to understand the rules for working after retirement, as well as local authorities who want to hire them.

“There are a lot of union retirees who are at the same risk of having to pay unlimited damages for any mistakes they make trying to help after they retire,” he said in an interview with CalMatters.

Attorneys for three major groups representing local government agencies involved in CalPERS — the League of California Cities, the California State Association of Counties and the California Association of Special Districts — also wrote a joint letter urging the pension board to give more weight to Cox’s decision. They called CalPERS “out of touch” in “these situations.”

“Due to a lack of transparency, CalPERS personnel practices sometimes appear to create backroom regulations and inconsistent processes unknown to local government employers,” they wrote.