What exactly is the reason for the separation from service for six months?
The separation from service requirement seeks to curb the practice of retiring from a position and drawing a pension benefit from that service while returning to the same or similar position and earning a salary in that position. This practice is often referred to as double dipping and was a major concern of the Legislature and the Governor as they discussed pension legislation last year.
New requirements regarding the separation from service, or zero dollar earnings limit, are a result of pension legislation under AB 340 or the California Public Employees’ Pension Reform Act of 2013 (PEPRA) passed by the Legislature and Governor Brown in September of 2012. PEPRA took effect on January 1, 2013, and applies to all new, current and retired members who retire on or after January 1, 2013, regardless of your age, for the first 180 days of your most recent retirement, or essentially the first six months following your most recent retirement.
If you return to work considered CalSTRS-covered employment, whether as an employee of the district, a contractor or an employee of a third party, during the first 180 days, or six months, following your most recent retirement date, CalSTRS will reduce your retirement benefit dollar-for-dollar by the amount you earn up to your benefit amount payable during that period. This requirement also applies to Cash Balance annuitants who are under normal retirement age.
For 2% at 60 members who are at least age 60, and 2% at 62 members who are at least age 62, that 180-day period in which no compensation could be earned may not apply if your appointment is necessary to fill a critically needed position, the governing body of your employer approves the appointment in a specified manner, you did not receive any financial inducement to retire, and your termination of service was not the cause of the need to acquire your services.
The limited exemption from the annual earnings limit, for retired members appointed by a county superintendent of schools, the California Community Colleges Board of Governors, the State Board of Education or the State Superintendent of Public Instruction is extended through 2013-14, but the exemption will not apply if you received a financial inducement to retire within the previous six months.