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.
The board also didn't specify who might be reviewed, but there are some obvious cases:
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 email@example.com. Links to past columns on this subject can be found at contracostatimes.com/daniel-borenstein.