Signaling a major attitudinal shift, the retirement system that five years ago became the poster child for California public employee pension spiking announced it will now review past calculations to see if excessive retirement payments can be rolled back.

The Contra Costa Employees' Retirement Association calculates most pensions based on an employee's length of service and highest year of income, usually from the final 12 months worked. At issue is whether that income was improperly inflated.

Spiking enabled Moraga Orinda Fire Chief Peter Nowicki to retire from a job that paid $185,000 and draw a $241,000-a-year starting pension, with subsequent cost-of-living adjustments. When reported in 2009, the pension drew national attention, but was only the first of many highlighted in this column.

Retirement association directors announced Wednesday they will review salary data looking for unusual final-year income increases. The board noted that the pension system has a "fiduciary obligation to pay only the legally correct benefits earned by its members."

The association has always had authority to review past pensions. But new state law mandating such reviews, five years of reports of excesses and a shift in membership of a board once controlled by labor advocates have prompted this more aggressive approach.

It's unclear how far directors plan to go. They didn't specify whether they will revisit the system's legally questionable counting of unused leave time as part of final-year salary, the most costly source of pension inflation.


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The board also didn't specify who might be reviewed, but there are some obvious cases:

  • Nowicki. About $40,000 of his $241,000 starting annual pension was directly attributable to amendments to his contract that he convinced the fire district board to approve three days before he retired.

  • San Ramon Valley Fire Chief Craig Bowen. He converted a $221,000 salary into a starting pension of $284,000. Spiking included counting as income an auto allowance instituted while he was chief, doubling up sale of unused administrative leave during his final year, and selling back twice as much unused vacation in his final year as allowed under the program.

  • Contra Costa County Administrator John Cullen. He swapped a $245,000 salary for a $240,000 starting pension. In his final year, he directly collected money that the county previously paid to a retirement savings account on his behalf. Cullen then made the savings contribution. Passing the money through him enabled him to count it as income toward his pension.

  • Cullen and nine others boosted their salaries through a program he initiated to pay top executives a bonus if they provided a year's notice before retiring.

  • Eight county hazardous materials specialists who retired since 2008 boosted final salary with on-call pay. For example, Sonny Khoo (final salary $94,255; starting pension $126,688), volunteered during his final year for more than 4,800 hours of on-call duty, collecting more than 1,200 hours of additional salary. That was more than twice as many on-call hours as he had worked the prior 12 months.

  • County doctors Priscilla Hinman, David Hearst and Krista Farey fattened their final-year salaries with on-call pay under a salary-supplement program implemented by Health Services Director William Walker. But the doctors weren't actually on call.

    While the cases present different pension-spiking issues, they have a common factor: The retiring workers could also count as final-year income the value of payments received at termination for unused leave, especially vacation time.

    The practice, which violates past state court rulings, has been limited to a few county-level pension systems. Contra Costa has been the worst. In the 2012 pension law changes, state lawmakers reaffirmed those court rulings and explicitly banned "terminal pay" spiking.

    Employee groups in Contra Costa, Alameda and Merced counties sued, claiming the new law violated past promises. But Contra Costa Judge David Flinn recently ruled those promises were not binding because they were illegal to begin with.

    While the cases before Flinn pertained to current employees, his ruling suggests that prior pensions that included terminal pay were also improper. The question for pension boards in the three counties, especially Contra Costa, is whether they intend to correct those excesses, too.

    Daniel Borenstein is a staff columnist and editorial writer for the Bay Area News Group. Contact him at 925-943-8248 or dborenstein@bayareanewsgroup.com. Links to past columns on this subject can be found at contracostatimes.com/daniel-borenstein.