News release

CalSTRS Pension Abuse Hotline and Compensation Review Unit Announced
The hotline and review unit supplement spiking prevention and correction efforts at CalSTRS

 WEST SACRAMENTO, CA  – The California State Teachers´ Retirement System today announced the establishment of a Pension Abuse Reporting Hotline and the launch of a Compensation Review Unit to enhance its efforts at curbing pension spiking.

The Pension Abuse Reporting Hotline will allow anyone to anonymously report cases of suspected pension abuse, including spiking–the inflation of pay during the final compensation period for the purpose of increasing the pension benefit. The hotline is part of a multi-faceted reporting system comprised of:

  • A toll-free telephone number (855) 844-2468
  • An online submission form available on the CalSTRS website
  • A separate confidential postal mail station to receive reports of suspected pension abuse or spiking. The address is P.O. Box 15275, MS-16, Sacramento CA 95851-0275

 

In addition, the new Compensation Review Unit will focus on compensation changes that may signal pension spiking. The unit will gather the facts and analyze each case individually. CalSTRS must conduct a deliberate and exhaustive review of all suspected spiking cases to afford members due process as resulting actions could have significant implications on their lifetime retirement income.

“Over the last fiscal year, an anti-spiking task force within CalSTRS has ´the ball´ on controlling pension spiking,” said Teachers’ Retirement Board Chair Dana Dillon. “Today’s actions put CalSTRS at the forefront of efforts to prevent, detect and correct incidents of spiking.”

“CalSTRS takes pension spiking very seriously and supports efforts to strengthen laws to combat it. By continuing to use proven processes, we take great care to be thorough and deliberate in reviewing any suspected spiking cases before changing a member´s pension payment in a manner consistent with the law,” said CalSTRS Chief Executive Officer Jack Ehnes. “These latest improvements will help ensure that retirement benefits paid to hard-working educators will be duly earned and paid according to their creditable compensation and length of service.”

These new components supplement ongoing efforts to address spiking, which include:

  • An automated salary review that flags annual salary bumps exceeding allowable limits. CalSTRS conducts reviews to determine whether the increase appropriately reflects changes in duties or were provided in order to spike the pension.
  • A robust, risk-based school district audit program that identifies employers who have provided inconsistent or accelerated pay increases, particularly during an employee’s final compensation period. In 2009-10, 50 school district audits identified $1.7 million in overpaid monthly allowances that are in various stages of recovery.
  • A Defined Benefit Supplement Program, which created a hybrid structure in 2001, allows CalSTRS to ensure that contributions made on extra compensation for summer school or other extra-pay assignments are credited to a cash balance account that acts like a 401(k) and do not figure into final compensation, a factor in setting pension benefits.

 

Moreover, the CalSTRS plan design provides an inherent defense against spiking because compensation for the vast majority of CalSTRS members adheres to a strict salary schedule established through collective bargaining. The average CalSTRS member retires near age 62 after more than 25 years of service with a pension that replaces about 60 percent of her salary. Members receive no Social Security benefits for CalSTRS-covered employment and generally do not receive employer-paid health care benefits after age 65. Of the more than 200,000 retirees who receive CalSTRS pensions, only about 2 percent exceed $100,000.

The California State Teachers´ Retirement System, with a portfolio valued at $152.7 billion, is the largest teacher pension fund and the second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plans, as well as disability and survivor benefits. CalSTRS serves California´s 852,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.

 

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