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Minnesota pension system investigates padding plans | Duluth News Tribune | Duluth, Minnesota

imagesPublished August 10, 2013, 12:00 AM

Minnesota pension system investigates padding plans

Minnesota’s largest public pension system is investigating how widespread retirement plan spiking is among local government worker members.

 

 

ST. PAUL — Minnesota’s largest public pension system is investigating how widespread retirement plan spiking is among local government worker members.

The Public Employees Retirement Association, or PERA, has started looking into the issue of workers boosting their final average salary, primarily through massive amounts of overtime, according to the St. Paul Pioneer Press.

The move came after the newspaper’s investigation that revealed spiking among supervisors in the St. Paul Fire Department.

When that story was published in December 2012, PERA Executive Director Mary Vanek said the pension system has no way of determining whether workers are boosting their “high five” salaries with overtime because employers report only a worker’s total salary, without breaking out how much came from overtime. However, PERA routinely

receives complaints from workers about how others are spiking their pensions, she said.

Earlier this year, PERA requested three years’ worth of salary data, including the overtime amounts, from local governments, in order to determine whether spiking is happening more broadly.

Vanek said a report about this analysis should be ready for the Board of Trustees’ Dec. 12 meeting.

On Thursday, Vanek and PERA’s actuary told board members about an innovative approach to limit spiking, which a public pension system in Ohio launched in January.

The Ohio Public Employees Retirement System attempts to find “outliers” who have an initial pension benefit that is “out of proportion” with the contributions they made during their working years, said Bonnie Wurst, an actuary with Gabriel Roeder Smith & Co.

“It’s an ingenious approach,” Vanek said, noting that Ohio is the only state using it.

PERA board members did not discuss the idea, however.

Vanek said the other anti-spiking option her office will investigate is a limit on how much salary can increase during a worker’s “high five” earning years. New York and Texas both use this provision, excluding from the final average salary any pay increases above 10 percent.

At least 15 other states have enacted “anti-spiking” provisions in recent years, including California, which prohibits overtime from being included in final average salary calculations for new hires.

Minnesota has some provisions already that limit the potential for spiking, including using a five-year window for the average salary calculation and preventing sick and vacation payouts from being counted as salary.

 

via Minnesota pension system investigates padding plans | Duluth News Tribune | Duluth, Minnesota.

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