Read this article and you decide... (Link to Article in California Chronicle)
Bill To Curb Public Employee "Pension Spiking" Passes Legislature
SACRAMENTO – Legislation authored by State Senator Joe Simitian (D-Palo Alto) to curb "pension spiking" in the state´s two largest pension systems has passed the Legislature. Senate Bill 1425, which pertains to the California Public Employees´ Retirement System and the California State Teachers´ Retirement System, now moves to the Governor´s desk.
Pension spiking is the practice of boosting an employee´s final salary before retirement by cashing out on vacation time or administrative leave, among other methods.
Because pensions are often based on final-year compensation, inflating end-of-career incomes artificially boosts pensions throughout retirement. "For the most part," said Simitian, "the process is entirely legal. Simply put, the rules now in place encourage employees to game the system."
A 2007 study by San Francisco´s non-profit Pacific Research Institute indicates that pension spiking costs California taxpayers roughly $100 million each year.
"Prior pension legislation was never intended to authorize the pension spiking we are seeing," said the bill´s joint author, State Senator Lou Correa (D-Orange County). "It´s an abusive practice that robs Californians of vital services and precious dollars."
Senate Bill 1425 requires that an individual´s pension be based on a set of criteria that prevent employees from padding final salaries with one time bonuses, end-of-career promotions, and accrued vacation time.
"Pension spiking does a disservice to the public, who ultimately foots the bill; and it does a disservice to other public employees who rely on the resources and solvency of the system for a secure retirement," said Simitian.