Public pension plan targets

With the state’s finances in a shambles, an issue that is drawing increasing scrutiny is the abuse of public pension systems, including double-dipping and pension “spiking.”

A plan by the Assembly’s ranking member on pension and retirement issues would bar boosting a favored worker’s pay solely in order to inflate retirement benefits – an action known as “bumping” or “spiking” — and place local public pension systems under tighter state control.

It would apply to all public pension systems in the state, including the California Public Employees’ Retirement System, the State Teachers Retirement System and the pension systems in 20 counties that were setup by a 1937 public retirement law. The latter, which have their own boards and administration, include Los Angeles, Orange, Sacramento, Alameda, Mendocino, San Diego, Ventura and others. The full list of the county retirement systems is available here.

It would limit a worker’s final compensation to the average increase of other employees in the same or related work group, a move intended to limit spiking. To limit double-dipping, it would require retirees to wait at least six months before working for any other public entity. Currently, there are cases in which a public employee will retiree on a Friday and come back to work Monday as a contract employee or retired annuitant while collecting retirement benefits.

The legislation, AB 1987, is authored by Assemblyman Ed Hernandez, D-West Covina, and is partly in response to media reports of six-figure pensions for public workers. One pension reform group, at CaliforniaPensionReform.com, lists more than 9,000 retired government employees with pensions of $100,000 or greater. The group includes a former city manager with a half-million-dollar annual pension. At least two ballot initiatives also have been proposed to curb pension benefits.

The legislation by Hernandez, the chair of the Assembly Committee on Public Employment, Retirement and Social Security, also would set up an auditing system to catch violations. In part, it is patterned after a 1993 Senate bill, SB 53 sponsored by CalPERS, that curbed pension spiking. The Hernandez bill takes the rules in the earlier bill and applies them to all public pensions systems, including local systems in cities, one expert said.

In a written statement, Hernandez said “teachers, nurses, firefighters, and police officers deserve an adequate and secure retirement that is not threatened by a few unscrupulous individuals trying to fatten their own benefits.”

Under his bill, retirement boards would block intentionally spiked or manipulated pension payments and require that the employer and employee prove that the increase was justified. The bill would also prevent against accrued vacation, severance or settlement pay from counting towards an individual’s retirement benefits.