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J . 0.A-g CALPERS SEEKS INPUT ON RETIREES "RETURN TO WORK" RESTRICTIONS The CalPERS staff held a meeting on Friday, the law for some time but employers continue to January 9, to discuss recommendations that will be make such agreements). The question is, however, made to the Board at its February meeting that how is this provision going to be enforced? How is deal with regulations of retirees returning to work. CalPERS going to prove that a conversation City officials are asked to review these recommen- between the public agency and the soon-to-be- dations and provide written responses to the retiree about when to return to work ever occurred? CalPERS Board by the first week of February. Background 2. Bona Fide Separation in Service - Members under normal retirement age must have a 90-day According to the CalPERS staff, it is imperative separation in service prior to returning to a that regulations are put in place, in conjunction with CalPERS covered agency while retired. Government Code 21220.5, in order to maintain its Effects current IRS tax status. The Government Code reads: 1. We see this as affecting the miscellaneous employees much more than we see it affecting "A retired person who has not attained the public safety employees. Rarely do we find a public normal retirement age shall have a bona fide safety officer retiring prior to the age of 50 unless it separation in service to the extent required by the is due to an industrial disability, and in that case, Internal Revenue Code, and the regulations pro- these provisions do not apply. mulgated thereunder, before working after retire- ment pursuant to this article. The board shall 2. We anticipate that public agencies are going establish, by regulation, the criteria under which a to re-evaluate whether they are going to change bona fide separation is satisfied. " their formulas from say, 2% at 55 to 3% at 60, because the NRA then increases and the likelihood The "shady" areas that need more definition. of these provisions being applied to retirees prior to according to CalPERS staff, are the terms, "normal the NRA increases. retirement age," and "bona fide separation in Examples service". Those definitions must be developed in order to avoid IRS prohibited in-service distribu- 1. A finance manager is getting ready to retire. tions, His/her public agency has a 3% at 60 benefit The Meeting on Friday formula, and s/he decides to retire at 58. S/he cannot make any prearrangements to come back to CalPERS staff is proposing the following recom- work for any public agency in CaIPERS, S/he also mendations to the Board: cannot come back to work for a public agency in CalPERS for 90 days. 1. The definition of the "normal retirement age" (NRA) will be synonymous with the formula age. For 2. A finance manager, whose public agency has instance. a public agency that has a 2.5% at 55 3% at 60 decides to retire at the age of 60. The benefit formula will have a NRA of 55. A public prearrangement and separation in service require- agency that has a 3% at 50 formula will have a NRA ments do not apply to him/her, therefore, allowing of 50, and a 2% at 60 formula will trigger a NRA of that person to go back to work under the 960-hourl 60. If a CalPERS member intends to retire before year provisions the very next day after s/he retires. the NRA. they must adhere to the following regula- tions: 3. A city manager with a 2% at 60 benefit formula, retires at 56, and instead of returning to 2. No Predetermined Agreement with Employer work as an "interim" manager while the agency - Prior to retirement an employer can make no finds a replacement, s/he is hired through a per- agreement to render service after retirement (either sonal services contract to perform duties other than verbal or written) with members under the normal those regularly performed by the city manager. The retirement age regardless of the length of the NRA, the predetermined agreement and the bona- separation. (According to CaIPERS, this has been Continued on Page 4 Visit the League's Official Web Siteuwww.cacities.org PRIORITY FOCUS/PAGE 3