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Is it “Abuse” when you follow the rules?

4 comments

Stephen Ceasar, writing in today’s New York Times, describes a report released by Attorney General Andrew M. Cuomo:

From the Pension Padding website:

In March 2010, Attorney General Andrew M. Cuomo commenced an investigation into a recurring problem known as “pension padding” or “pension spiking”– the manipulation of salary and overtime payments to inflate the ultimate pension benefits paid to retirees.

Ceasar provides detail from a press conference:

Of the 50 agencies examined by his office, 28 had recent retirees who, before they approached retirement, had never worked overtime or who had worked far fewer extra hours, Mr. Cuomo said. With overtime, the 2008 pay for one employee cited in the report nearly doubled. Pension benefits, Mr. Cuomo noted, are often based on an employee’s total income in the last few years of employment, and not just on base salary.

HIGHEST THREE YEARS OF COMPENSATION

Many municipal pension plans use the average from the highest three years to determine the annuity payment. It is written within the pension regulations.

This report shows that some employees are bulking up their last three years on the job by working overtime.

The Attorney General requested data on 2009 retirees. Of the 3,688 employee records reviewed:

  • 14 start working working substantial overtime only when they near retirement (with a firefighter at the top of the list)
  • 26 increased the annual overtime they worked by 50% or more as they near retirement

So 0.4% of those surveyed went from little/no overtime to a lot – spiking their workload and increasing the size of their annuity.

And 0.7% of those surveyed ramped up their overtime in the last few years for the same reason.

Both activities are legal within pension regulations.

CHANGING REGULATIONS THROUGH OUTRAGE

This is not a startling new discovery.

After the 9/11 attack on New York there were articles discussing the second wave of municipal retirements as those that worked the recovery would want to retire within their highest paid year.

From a September 27, 2002 New York Times article by Kevin Flynn:
Metro Briefing | New York: Manhattan: Firefighters To Use Ads

The ads, set to run today under the headline ”Save the FDNY,” argue that the changes would help prevent retirements. Many firefighters say they cannot afford to pass up the opportunity to retire on salaries increased by the overtime they earned after the World Trade Center attack. The changes would allow firefighters to use their highest-earning year, not their last year, when calculating pension benefits.

Reading the report that was released yesterday, there are recommendations on changing the pension regulations to control the practices done by 1.1% of the 3,688 employees surveyed 50 different municipal entities who retired in 2009.

There is a high level of vagueness, except for selected “outrageous examples.”

POINTING THE FINGER AT THE WRONG GROUP

Ceasar’s article included a statement released from Mr. Cuomo’s office:
“If only 2 percent of new pension recipients followed some of the practices found in the attorney general’s investigation, taxpayers could face an additional $120 million in pension benefit payments over the next 20 years.”

Nice way to demonize employees when regulations are made by administrators and politicians.

Mike “FossilMedic” Ward

Also on FireGeezer…

Posted by on July 8, 2010 • Filed under: Administration & Leadership, Command & Leadership, News, Urban Commander • Tagged: , , , , ,
  • Totwtytr

    Don't you understand that those rules were intended to benefit the administrators and politicians who made them, not rank and file members? How dare they take advantage of the same rules that the administrators and politicians take advantage of? What nerve.

  • MNChief

    This is classic politics. They're doing their best to deflect the blame onto a group other than themselves and they've chosen to label public safety pension recipients as “greedy and manipulative”, rather than own up to the fact that the rules are being followed. The legislature made the rules, the public safety personnel figured out how to optimize their return based on those rules.

    Nothing greedy about it and everything worked fine when cities/states were “flush”. Give the folks a pension increase and hopefully they'll remember it when they go to the ballot box.

    In addition to deflecting responsibility, they're setting the stage for “reform”. Don't be surprised when they ask for high contributions from the rank and file, and/or a reduced benefit calculation for new hires. The other option will be to base pension earnings on base wages, and not include OT. I can see all three happening in states over the next two years.

  • Dal90

    Labor is a partner in this with politicians and administrators. They share both credit and blame.

    “The legislature made the rules, the public safety personnel figured out how to optimize their return based on those rules.”

    And how much lobbying, working politician's campaign phone banks, and political donations were made by the locals and state unions in achieving a legislature that agreed to such rules?

    Don't suddenly feign that these rules were adopted without the active participation of organized labor.

  • http://www.firegeezer.com Mike "FossilMedic" Ward

    Hi Dal,

    Thanks for the post.

    I am not ignoring that labor is a big part of the process.

    But for the Attorney General to threaten to charge employees with fraud because they “spiked” or “padded” their last three years using a procedure that is within the regulations is demonizing.

    Mike