Last year, the California Governor signed Senate Bill (“SB”) 765 into law, temporarily changing some post-retirement work restrictions for California State Teachers’ Retirement System (“STRS”) retirees. These temporary changes go into effect Monday, July 1, 2024.
Standards Pre-SB 765
The State Teachers’ Retirement Law (“STRL”) significantly restricts the type of work STRS retirees may perform for public school employers after their retirement. Generally, unless a STRS retiree chooses to forego their retirement status and reinstate to active employment with a STRS employer, the retiree may only perform “retired member activities” or specific work pursuant to a personal services contract.
The STRL defines “retired member activities” as one or more activities identified in Education Code section 22119.5 (a) or (b) or section 26113 (a) or (b) that is performed within the California public school system. Examples include but are not limited to the work of faculty, adult education instructors, instructors at regional occupational programs, academic or vocational counselors, directors or coordinators who plan courses of study, school nurses, speech therapists, librarians, and those responsible for the supervision or administration of these duties.
Public employers that hire STRS retirees without reinstatement to active service to perform “retired member activities,” must comply with additional restrictions prior to hiring such retirees. A retiree may not perform retired member activities for a STRS employer within 180 days of their retirement date (or during the first six consecutive months after the most recent retirement if the member received a STRS golden handshake or received any financial inducement to retire from any public employer.) However, current law provides an exception to this requirement if the member has reached retirement age and if the governing body of the employer approves the appointment by a resolution that specifies certain criteria are satisfied. If a retiree performs any retired member activities before this waiting period has elapsed, the member’s retirement allowance will be reduced dollar for dollar until the overpayment is repaid to the system.
Moreover, the STRL places restrictions on the amount of compensation retirees may earn while performing retired member activities for a STRS employer. First, the annualized rate of pay for any STRS retiree performing “retired member activities” shall not be less than the minimum, nor exceed the maximum, paid by the employer to other employees performing comparable duties. Second, under existing law, a STRS retiree performing “retired member activities” may not earn more than one-half of the median final compensation of all members who retired from service during the fiscal year ending in the previous school year. The STRS Board publishes this number by July 1 of each year. For the 2023-2024 fiscal year, this limit was $ 50,655. The arguably low-dollar compensation limit can significantly restrict a public school employer’s ability to hire STRS retirees – and particularly those employed in supervisory or administrative positions – as the compensation limit may be reached after only a few short months of employment.
These post-retirement restrictions generally do not apply if a public school employer hires a retiree under a personal services contract. However, in such circumstances the employer must demonstrate that: 1) the services are not otherwise available within the community and 2) the services involve work that cannot satisfactorily be performed by current employees due to lack of resources or because the retirees possess highly specialized and technical skills.
Impacts of SB 765
SB 765, effective July 1, 2024, will temporarily change the 180-day waiting period requirement and the postretirement earnings limit described above. Under SB 765, a school superintendent, the county superintendent of schools, or the chief executive officer of a community college – as opposed to just the governing board – may submit a request for an exemption to this requirement. The request must certify:
SB 765 also amends existing law to increase the limit of postretirement compensation to 70% of the median final compensation – up from 50% — of all members who retired for service during the fiscal year ending in the previous calendar year. Under SB 765, the compensation limit for the 2024-2025 fiscal year is $74,733.
The Legislature declares in SB 765 that the changes made by this bill are necessary to address the shortage in teachers and staff the state is experiencing. The bill further declares that retired teachers and staff are some of the best-equipped candidates to provide instruction and services to our students.
The amendments made by SB 765 become operative July 1, 2024, and remain in effect through June 30, 2026 unless amended by the Legislator.
Liebert Cassidy Whitmore attorneys are available to assist school employers to determine if they are eligible to take advantage of SB 765’s 180-waiting period exemption and with requests to STRS to utilize such exemption. If you have any questions about this issue, please contact our Los Angeles, San Francisco, Fresno, San Diego, or Sacramento office.