The Contra Costa retirement board decided this week to let 12 former county hazardous materials workers keep their inflated pensions, leaving taxpayers with the $2.1 million tab.
The decision departed from the board’s recent years of cracking down on pension spiking. However, Chairman John Phillips said Wednesday’s decision should not be viewed as a precedent that would limit the board in the future.
In this case, members of the board of the Contra Costa County Employees’ Retirement System, which operates independently of county government, were troubled by county officials’ actions that created confusion for workers about what was permissible.
In the year before each of their retirements, the employees had volunteered for extra on-call hours — in most cases, far more than in prior years — that boosted their final pay and enabled them to spike their pensions.
Analysis by staff of the Contra Costa Employees’ Retirement Association showed the 12 hazardous materials workers used the extra hours to increase their pensions between 6 percent and 29 percent.
The workers, who retired between 2007 and 2014, received starting pensions ranging from $60,000 to $127,000 a year. The amounts, which will increase annually with the cost of living, varied due to years on the job, final-year salaries and other income such as the on-call pay.
Normally, compensation for shifts for which employees volunteer cannot be counted as salary for pension calculations. But the pension board majority, after listening to testimony from retirees and their attorneys, concluded that the county’s on-call policies were unclear and that workers felt obligated to fill the shifts.
Phillips was a key vote. He has advocated for cracking down on pension spiking. His hesitance in this case swung the board’s final decision.
It wouldn’t be fair to punish workers for trying to maximize their pensions when they had been told that they could do so, Phillips said later. “The fact that we had these issues really was because of the employer side, not the employee side.”
He has a point. Rather than equitably distribute the work load between the employees, county officials allowed them to trade their shifts so that those nearing retirement could load up their income.
Indeed, Hazardous Materials Chief Randy Sawyer had previously defended the practice. He and his boss, county health director William Walker, had been indifferent to the cost of the spiking or their role in enabling it.
The scheme, first reported in this column in July 2013, resulted in some workers in the months before their retirements being on-call almost all the hours they weren’t at work.
The employees collected one hour of extra pay for every four hours they carried a pager and were available to respond to chemical spills around the county.
Three of those workers, Paul Andrews, Sonny Khoo and Jerry Yoshioka, each collected more than $50,000 of on-call pay during their final year on the job — and then counted that as income when calculating their pensions.
The resulting spike creates a pension system shortfall. Employees and their employers are supposed to contribute a portion of their income during their working years to cover future pension costs. But when income spikes in the final year, the funds collected and invested won’t cover additional the cost of the pensions.
The retirement system estimated the additional pension expense for the 12 workers will cost the county $2.1 million. That’s the present value of the extra benefits those workers will receive over their lifetimes.
It’s a debt the county must pay off with interest over the next 18 years. Ironically, most of the cost will fall not to the health department budget but to the sheriff’s.
That’s because the hazardous materials workers receive lucrative
retirement benefits usually granted to police and firefighters in California. Most receive pensions equal to 3 percent of their final salary for every year on the job.
Consequently, the hazardous materials workers’ pensions are pooled with the much-larger Sheriff’s Department, which bears most of the pool’s costs.
Ultimately, the price will be paid by taxpayers, who will receive fewer services or pay higher taxes. The money has to come from somewhere.
Clearly, the county needs leaders who care enough to clarify the rules and control the costs of pensions. This must not happen again.
