CalPERS Issues Circular Letter Reminding Public Agencies to Comply with Retired Annuitant Restrictions and Requirements or Face Steep Penalties

On June 4, 2025, the California Public Employees’ Retirement System (“CalPERS”) issued Circular Letter No. 200-021-25 (“Circular Letter”) reminding Public Agencies to ensure compliance with the Public Employees’ Retirement Law (“PERL”) and the Public Employees’ Pension Reform Act of 2013 (“PEPRA”) when employing retired annuitants or face steep penalties. The Circular Letter mostly conforms to existing requirements, but many of those requirements are misunderstood and technical. The Circular Letter follows increased auditing and scrutiny of retired annuitant appointments.

Who is a “Contracting Agency”

Historically, CalPERS guidance allowed school districts and community colleges to be considered a “contracting agency” under Government Code section 21221 subdivision (h), which allowed them to hire retirees into vacant positions while actively recruiting for a permanent employee. However, in a previous update, CalPERS clarified that most schools and community college districts are not “contracting agencies” for the purposes of the PERL and cannot use the Government Code section 21221 subdivision (h) interim appointment. The Circular Letter reaffirms this position, which also applies to Government Code section 21221 subdivision (g), since it also references a “contracting agency.”

How Can Contracting Agencies Use Retired Annuitants?

If your agency is a contracting agency with CalPERS, you can still use retired annuitants to temporarily fill a position for an employee on a leave of absence under Government Code section 21221 subdivision (g) or to fill a vacant position on an interim basis while recruiting for a permanent appointment under section 21221 subdivision (h). The “extra help” provision under Government Code section 21224 also remains as an option.

While CalPERS previously indicated, internally, that PEPRA may have implicitly repealed section 21221 subdivision (g), this update confirms that section 21221 subdivision (g) appointments are still available to contracting agencies—so long as they also comply with the requirements of PEPRA.

For a leave of absence appointment under section 21221 subdivision (g), the following apply:

• The appointment must be approved with a resolution in an open meeting and cannot be placed on the consent calendar. The resolution should indicate that the position is available because of a leave of absence, granted to a person on payroll status, for a period not to exceed one year. It should also indicate that the position requires specialized skills, and the retired person filling the position has the specialized skills required for the position.
• The resolution must be filed with CalPERS prior to the appointment.
• The employment must be terminated at the end of the leave of absence and is not to exceed one year.

These appointments are typically used for unique positions, like an interim city manager, police chief, director, or other managerial/executive positions.

To fill a vacant position on an interim basis during the recruitment for a permanent appointment under section 21221 subdivision (h), the following apply:

• The position requires specialized skills, and the retired person filling the position has those specialized skills or is appointed during an emergency to prevent stoppage of public business, like earthquakes, floods, etc.
• The retired annuitant can only be appointed to the position one time.
• There must be an open recruitment to permanent fill the vacant position.
• CalPERS recommends, but does not require, that the appointment be approved with a resolution in an open meeting rather than on a consent calendar. The resolution should be filed with CalPERS prior to the appointment.

Like appointments under 21221 subdivision (g), these appointments are also typically used for unique positions, like an interim city manager, police chief, director, or other managerial/executive positions.

Along with the above requirements, appointments under both section 21221 subdivision (h) and 21221 subdivision (g) have to comply with all other post-retirement restrictions set forth in Government Code section 7522.56, including the 960-hour per fiscal year limitation and that the retired annuitant cannot receive any benefits, incentives, compensation in lieu of benefits, or other forms of compensation in addition to an hourly rate.

Consent Calendar or Resolution in Open Meeting

While there is no statutory ban on approving appointments under 21221 subdivision (h) or 21221 subdivision (g) via a consent calendar, CalPERS recommends in the Circular Letter that appointments under 21221 subdivision (h) be approved with a resolution in an open meeting. For appointments under 21221 subdivision (g), the Circular Letter goes further, requiring that the appointment be approved in a resolution in an open meeting rather than on a consent calendar. Although, unlike waivers of the 180-day waiting requirement under PEPRA, there is no statutory requirement that the appointment be placed on the consent calendar, agencies should do so to avoid any conflicts with CalPERS’ position.

Overall Takeaway

Hiring retired annuitants continues to be very limited for CalPERS-covered employers and subject to stringent restrictions. Failure to comply with those restrictions can lead to steep penalties, including changing an employee’s retirement date, requiring that they repay benefits paid during the appointment, and retroactive employee and member contributions.

Liebert Cassidy Whitmore attorneys are closely monitoring developments in relation to this Special Bulletin and are able to advise on the impact this could have on your organization. If you have any questions about this issue, please contact our Los Angeles, San Francisco, Fresno, San Diego, or Sacramento office.