Pension Spiking

From the same Money Magazine article as the last post. Sound familiar, Massachusetts muni workers?


"There is no justification, ever, under any circumstances for pension spiking," says Sylvester Schieber, director of research at Wyatt Co., a national benefits consulting firm in Washington, D.C. "It is a form of theft." Here's how spiking works: Traditional corporate pension plans typically base retirement benefits on your average earnings during your final three or five years of employment. These private plans usually exclude overtime and performance bonuses, restricting pension benefits to your base pay. By contrast, state and local pension plans are typically based on the final three years' compensation, and sometimes on the last year's alone, creating an incentive for public employees to boost their pre-retirement pay by such tactics as volunteering to delay their vacations and work overtime, thereby inflating lifelong pensions. Says Joseph Serota, a Fort Lauderdale attorney who defends cities against pension abuses: "It's often the senior managers who initiate such things, working hand in hand to help the rank and file -- and themselves."