Some state agencies are misinterpreting state law and wrongly rehiring employees who have retired, according to a state audit released Wednesday.

The audit by the Legislative Auditor General's office found only a few dozen cases in which the restrictions on post-retirement employment were circumvented. But, the report said, the practice is likely to grow if left unchecked, and it could be costly.

"While post-retirement employment is limited, it is growing and needs legislative attention," said Maria Stahla, who supervised the audit.

At issue are situations in which a state worker retires early and returns to work for the state, drawing retirement pay and a salary at the same time.

To do that, a worker must meet one of three criteria -- he or she must move to a different agency, observe a six-month waiting period or work only 20 hours a week or less.

Auditors, however, reported finding cases in which workers merely transferred to another division within an agency, a practice made possible by a "misinterpretation of legislative intent," the audit says.

In other cases, state workers retired, worked part-time for six months, then returned to work at the same department -- often in the same job.

Stahla also presented figures demonstrating that an employee who retires after 20 years and is rehired ends up being a larger drain on the state retirement system than if that person retires after 30 years of service, even though retiring at 30 years would pay a higher retirement benefit.

That's because early retirement means an employee contributes less to the system and draws more -- about 10 percent more, Stahla said.

"Departments believe they are saving money when they allow retirees to re-employ," she said. "However, agencies only see half the picture."

Those costs are transferred to the retirement system: "System costs usually outweigh agency savings," Stahla said.

Most employees who were allowed to retire and then return to the same department were in the Department of Corrections (37 employees) and the Department of Public Safety (eight employees). Auditors also found one manager in the Department of Health who did so.

There were also 18 employees who worked part-time for six months, then returned to their previous jobs -- 12 in the Department of Alcoholic Beverage Control and three each in the departments of natural resources and transportation.

The audit recommends that the Legislature clarify that employees can't simply transfer within a state agency; that part-time and contract work cannot count as part of the waiting period; and that the waiting period be extended to a year.

Heads of the corrections department and alcoholic beverage control responded to the audit, saying they had never intentionally violated state statute. Both agencies said they would abide by whatever the Legislature decides.

Daniel Anderson, counsel for the Utah Retirement Systems, said there is a potential for retiree rehiring to be costly, but that it's not a problem now. The people mentioned in the report account for less than one-tenth of 1 percent of state retirees, and any additional cost is within statistical variations on, for instance, how long people live, he said.

"There are a variety of valid opinions on this," he added. "The rehire retiree policies around the country are in flux, and there may be situations in which a rehiring is appropriate.

"There is a trend among public pension plans to loosen their post-retirement restrictions," Anderson said, although no other state policy is as liberal as Utah's is now.

This story appeared in The Daily Herald on page C1.