I like to occasionally touch on how people game the system in venues other than points, miles, and credit cards. Italy’s hookers-and-blow scheme comes to mind, as does the guy who worked over arcades. And now, thanks to Zero Hedge, I’ve learned how California public employees exploit the rules in pension schemes to make a lot more money than everybody (except for Tahsir and a few others, of course) makes from manufactured spending.
The source is this two-year-old LA Times story about what they call ‘salary spiking’. Here’s how it begins:
Approaching retirement, Ventura County Chief Executive Marty Robinson was earning $228,000 a year.
To boost her pension, which would be based on her final salary, Robinson cashed out nearly $34,000 in unused vacation pay, an $11,000 bonus for having earned a graduate degree and more than $24,000 in extra pension benefits the county owed her.
By the time she walked out the door last year, her pension was calculated at $272,000 a year — for life.
Who needs the Chase Sapphire Reserve (besides a cat, of course) when you’re pulling down an extra 50 grand per year by working the system? And this guy did even better:
Former Undersheriff Craig Husband added nearly $92,600 in unused vacation time, resulting in a $257,997-a-year pension, nearly 30% above his working pay.
What prompted ZH to dig up this old article was a recent state appellate court ruling that some of these pensions can be cut back retroactively:
The case in Marin County, a community north of San Francisco that’s among the wealthiest in the U.S., centers around the formula for calculating retiree payouts. Empowered by state law that sought to prevent “pension spiking” — which involved boosting compensation at the end of one’s career in order to elevate pension checks — the county in 2013 barred elements such as payments for waiving health insurance from being included in the formula that determines how much retirees receive. It was one of the first to implement the state law, the court said.
The union sued, saying such factors are considered part of workers’ regular pay and that the county violated legal precedents known as the California rule. Established through court decisions, the guideline prevents benefits for current employees from being decreased unless they received an offsetting advantage.
Clawbacks: they’re not just for Amex anymore!
At any rate, this followed the same trajectory as what we’ve seen in our hobby. When things are great, the people getting gamed don’t care. But when budgets tighten or too many people jump on the gravy train, the powers that be start clamping down.
One day I can mansplain the Brazilian public pension system, and how it’s a massive transfer of wealth from the poor to the wealthy in a high-inequality country. But not tonight.
I am going to have to say that salary spiking has been commonplace across the country. This is slightly unusual when the employee takes it upon themselves to increase their salary. The usual scenario that I have heard of is that the retirees supervisor increases the final year salary so that the pension is much higher.
Nothing new…mail workers take on huge routes their last few years since that is what their pension is based on.
My neighbor when I was a kid hopped between government jobs once he reached retirement since there was a lower thresh hold on the 2nd and 3rd place once you earned one. So he worked 20 years in the military go full retirement then went to the coast gaurd for 5 years and got a full retirement from them etc. and so on.
No wonder the government is broke!
This happened in Illinois too. When everyone’s budgets were in the toilet after the recession hit, there was enough motivation to look into things like this. It’s quite the story when you’ve just lost your house to hear that the town supervisor just retired on $50k more than they were even making when they were working. Yikes