CalPERS has reached a settlement in a long running administrative appeal involving several member retirees and local agencies that CalPERS asserted had violated the post-retirement employment rules. (CalPERS Case No. 2024-0999 (Sandhu, et al.)) For approximately 6 years, CalPERS had sought to recover benefit payments and required pension contributions from several member retirees and local agencies who worked as independent contractors for Regional Government Services, a public joint powers authority, which in turn contracted their services to the local agencies on a temporary basis. CalPERS staff contended that this arrangement violated the post-retirement employment rules, and over the course of several years demanded various amounts of reimbursement from the retirees ranging into hundreds of thousands of dollars – dramatically more than the employees earned in their post-retirement employment. In April of 2025, an appeals court agreed with CalPERS that the retirees had been common law employees of the local agencies. However, an administrative law judge with the State Office of Administrative Hearings ruled in January of 2026, that the three-year statute of limitations contained in Government Code section 20164 applied to bar CalPERS efforts to recover the benefit payments or retirement contributions. The administrative law judge also criticized CalPERS’ tardy and inconsistent demands for payments from the retirees, and the fact that CalPERS was unable to produce evidence at the hearing supporting its various calculations of the required reimbursements.
The affected retirees have asked to make the ALJ’s decision “precedential.” Not surprisingly, CalPERS staff sought to have the CalPERS board effectively overrule the decision – effectively burying the case and their misdeeds along with it.
On Tuesday, April 14, 2026, the CalPERS Board of Administration pulled the scheduled appeal hearing in from its agenda. In the settlement CalPERS abandons all efforts to recover any retirement benefit payments or pension contributions from the retirees or the involved local agencies and restores all benefits, including past payments which would have been received to the retirees.
While the settlement restores all the benefits to the retirees in this case, ending the six year saga for the retirees, it prevents the decision of the administrative law judge from becoming precedential in future CalPERS proceedings with respect to the application of the three-year statute of limitations. The retirees and several statewide organizations representing local public agencies including the League of California Cities, the California State Association of Counties and the California Special Districts Association had advocated that the OAH decision be declared precedential by the CalPERS Board of Administration. RPLG assisted the state-wide organizations in their request. With the settlement, however, the uncertainty concerning CalPERS application of post-retirement employment and independent contractor rules, as well as the limits on CalPERS ability to collect reimbursements in the case of violations of these rules will continue.
The post-employment issues are critical both to CalPERS retirees and to local governments — who, in our experience, are often in need of expert consulting services. CalPERS’ ultra-aggressive attack on post-retirement employment of its annuitants – despite its fiduciary duties to retirees, is inexplicable and needs to stop. At a minimum, CalPERS should stop attempting to control conduct through underground regulations, and regulate openly while taking input from stakeholder groups.
Retirees and local agencies that contract with CalPERS are advised to seek legal counsel concerning any such arrangements. Links to the decision of the OAH administrative law judge and the final settlement document are included below: