Benefits

Report Criticizes CalSTRS’ Pension Spiking Controls

By Rebecca Moore editors@plansponsor.com | September 07, 2012

September 7, 2012 (PLANSPONSOR.com) – A report criticizes the California State Teachers’ Retirement System’s (CalSTRS) efforts to detect and prevent pension spiking.

State Controller John Chiang’s review found CalSTRS does not adequately audit more than 1,900 reporting entities (including school districts), has missed opportunities to reduce instances of suspicious or unjustified salary increases, and failed to adequately use existing electronic systems designed to identify cases of pension spiking. Pension spiking occurs when benefit payments are based on unusually large or excessive final compensation amounts.  

The Comptroller’s office identified three major concerns: 

  • CalSTRS did not provide adequate oversight of the reporting entities it should be monitoring. For example, at the rate at which audits currently are being performed, each district would be audited only once every 48 years. In addition, CalSTRS’ audit process should have been more effective in detecting pension spiking at its reporting entities (i.e., school districts);
  • CalSTRS missed opportunities to increase reporting entity accountability. The independent review of the San Francisco Unified School District and the San Diego Unified School District concluded that these districts lacked the level of transparency and the necessary controls over management pay increases that a public entity should exercise on behalf of its constituents. As a result, pension spiking may be occurring at these districts; and
  • CalSTRS did not review or verify the results of electronic “edits” it put in place to specifically identify potential pension spiking, except when there was an occasional inquiry from other CalSTRS divisions. 

The review specifically examined the electronic methods that CalSTRS uses to detect and prevent pension payments based on unusually large or excessive final compensation amounts, the auditing processes the system uses to oversee the state's school districts and the efforts conducted by its newly formed Comprehensive Review Unit during the review period of July 1, 2009 through June 30, 2011. The scope of the review was expanded to include records from three school districts, one community college district and one county office of education. 

The report is here.