State police troopers use overtime to fatten pensions, Trib finds

Some Pennsylvania state troopers are boosting their pensions by tens of thousands of dollars through a controversial practice called “spiking,” a Tribune-Review analysis of state salary and pension records revealed.

Because their retirement plan is based on their single highest year's earnings, troopers who rack up large amounts of overtime compensation late in their careers can “spike” the amount they receive in retirement.

Records show that 80 percent of those who retired with 25 years of service spiked their pensions over an 18-month period.

The practice makes the troopers' pension benefits even more enticing. And experts say it's fueling an unprecedented exodus that could grow as more than 1,000 troopers become eligible for retirement this year and nearly 40 percent of the agency's officers qualify for pensions in the next four years.

Many states have banned spiking, but Pennsylvania is not among them. The troopers' pension plan allows them to retire with 25 years of service at 75 percent of their highest year's earnings and lifetime health benefits.

Even before overtime, most rank-and-file troopers with 25 years of experience collect salaries of $95,000 a year.

Although pensions vary, depending on how retirees opt to take their benefits, the Trib found that:

• Of 270 troopers who retired with at least 25 years of service between Jan. 1, 2014, and June 30, 2015, 215 were eligible for maximum annual pensions of more than $75,000 a year. Nine were eligible for benefits of more than $100,000 a year.

• Five troopers qualified for pensions higher than their base salaries, according to records.

• Of the 270 retiring troopers, only 36 did not accrue overtime to increase their pensions.

Troopers say spiking is merited because the state requires officers to retire at 60, and the agency does not participate in Social Security. But with state officials struggling to hold the line on taxes and plug an $18.2 billion hole in the State Employees Retirement System, some question the wisdom of allowing the benefit to stand.

Nathan Benefield, vice president of policy analysis for the Commonwealth Foundation, suggested the state could lift the retirement cap and sweeten benefits to compensate for troopers not receiving Social Security.

“In general, you think of a pension being based on a lifetime of work, and this ability to spike it just seems unfair to taxpayers and to other employees who don't have that kind of benefit,” Benefield said.

All Pennsylvania state employees receive traditional lifelong pensions. They are funded by a combination of investment earnings and employee and state contributions.

The average 2014 state retiree left with slightly more than 21 years of service and an average annual pension of $26,962.

Longtime troopers are part of the same pension system, but they are in a class by themselves. A 1988 collective bargaining agreement, upheld by the courts, established their retirement benefits at the 20- and 25-year levels.

Kenneth Ardon, chairman of the economics department at Salem State University in Massachusetts, who studies public pension systems, said including overtime in pension calculations can be an incentive for employees near retirement to pile up as much overtime as possible and lead managers to award overtime as “a bonus or retirement gift.”

“Depending on the details, each extra $1,000 in overtime could lead to an extra $20,000 or more of lifetime pension benefits. If two workers had similar work histories and were about to retire, but one of them was able to schedule a large amount of overtime in his/her last year, his (lifetime) pension could be hundreds of thousands of dollars higher. This doesn't make any sense to me,” he said.

According to the National Association of State Legislatures, the practice of including overtime in pension calculations has been capped or banned in several states in recent years as lawmakers struggled to deal with huge pension liabilities. North Carolina, New York, Georgia, Rhode Island, Illinois, Nevada and Texas are among the states that have taken steps to rein in the practice.

But it is a benefit troopers guard.

Last spring, in testimony before the House Appropriations Committee, which was considering a pension overhaul bill, Joseph R. Kovel, president of the Pennsylvania State Troopers Association, told lawmakers that troopers merit such considerations because of the nature of their work. Kovel, who declined to discuss the issue with the Trib, warned lawmakers that a Senate bill aimed at overhauling the state pension system and barring the inclusion of overtime could trigger mass retirements.

“With over 1,000 of our members retirement-eligible, a large, mass exodus of our most experienced and senior troopers will have a long-term and immediately devastating impact on our ability to sustain even the most rudimentary public safety services,” Kovel said.

Gov. Tom Wolf vetoed the pension bill, but state troopers had been exempted from the proposed changes before the measure reached his desk.

Richard Dreyfuss, a retired actuary and senior fellow for the Manhattan Institute for Policy Research, said police officers have support for maintaining enhanced benefits on both sides of the political aisle.

“The Republicans, who are big supporters of law and order, and the Democrats, who support public employee unions, come together on this,” he said. “But the idea that all calculations are predicated on one year's salary — I don't think is an appropriate way to design a pension plan.”