CalPERS drops 7-year battle with retiree annuities

from Adam AshtonCalMatters

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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 the saga has implications not only for pensioners, who no longer face “shocking” payment demands from their pension fundbut also for cities turning to former government employees as part-time workers for short-term staffing needs.

At one point, CalPERS adjusted benefits for retirees in a way that caused them to lose a monthly income. Under the agreement, they will earn what they are owed at their original retirement dates.

The four retirees are “back to where they should have been seven years ago,” said Scott Kivell, the attorney who represented the retirees during multiple court and administrative hearings. “It really wasn’t an agreement. CalPERS backed out and said they would give my clients everything.”

The case dates back to 2018, when CalPERS started looking at five retirees who worked for Regional Government Services, a firm that provides consultants and independent contractors to local government agencies. Each of the retirees had gone to work for the company, which housed them in different cities.

CalPERS auditors found that the retirees performed work under the direction of city supervisors and that they 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 overpayment letters saying they had received the wrong retirement income and that their retirement dates would be adjusted to the time they stopped working for the regional government offices, not the time they left government service.

One retiree, Margaret Souza, received a “notice of delinquency” from CalPERS in 2022 saying she was overpaid $846,292.

Another, Tarlochan Sandhu, was told in a February 2022 notice from CalPERS that he owed $454,474.

David Dowswell received a “past notice” saying he owed $664,289.

And Douglas Breese’s widow received one that said she was owed $36,192.

For the most part, CalPERS’ determination that retirees are in conflict with state laws has been held up in court. CalPERS lost only one case when the five employees sued the fund. It was Linda Abid-Cummings who won her case in Sacramento Superior Court, The Sacramento Bee reported.

Just last year, the 3rd Circuit Court of Appeals found CalPERS was vindicated when it found that Sandhu’s work for regional government offices violated California retirement law.

But a more recent ruling by an administrative law judge focused on the penalties and restitution that CalPERS wanted assessed. The fund was found to have violated a three-year statute of limitations on how far back it can collect benefits for violations of the retirement law.

Souza’s CalPERS review, for example, is from 2011. It sent her a “late payment notice” detailing the massive overpayment in February 2022.

Souza and the others received follow-up letters asking for lower amounts, an administrative law judge’s practice Juliet Cox was criticized for her decision in January.

“CalPERS staff members sent conflicting requests, in some cases for shocking sums, to Sandu, Souza, Dowswell and Breese’s widow. Their communications were riddled with errors and opaque,” Cox wrote.

CalPERS did not immediately accept Cox’s decision. His staff wrote to the CalPERS Board of Directors with a recommendation that rejects Cox’s decision and sends the case for a new administrative hearing.

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

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

The board did not take this step. After the meeting, CalPERS officials said in a written statement that the terms of the settlement would prohibit Cox’s decision from setting a precedent.

“We disagree with some features in (Administrative Law Judge Cox’s) proposed decision,” CalPERS officials said. “CalPERS staff works diligently to help members by always striving to provide them with accurate and clear information, and has done so here.”

Selivanov told the board that retirees who are open to part-time work need clear, “bright lines” to understand about post-retirement work rules, as do local governments that want to hire them.

“There are a lot of union retirees who are at the same risk of having these unlimited damages land in their lap for any mistake they make trying to help out after retirement,” she said in an interview with CalMatters.

Attorneys for three major groups representing local government agencies that participate 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 “inconsistent” in “these situations.”

“Lack of transparency, CalPERS staffing practices sometimes appear to create underground regulations and inconsistent processes that are unknown to” local government employers, they wrote.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.