Pension spiking at times is also referred to as “salary spiking” and is a process through which employees try to inflate their compensation in years that immediately precede their retirement years so that they can receive higher pension amount than they are actually entitled to receive. There have been several local public employees who have been trying to abuse the system towards the end of their professional careers with an intention of spiking their pensions that are a part of the Illinois Municipal Retirement Fund that in turn are costing millions to the local taxpayers, as reported by The Chicago Tribune.
There are several employees of the municipality around the state who have cleverly calculated how they can time their retirement as well as cash in unused sick and vacation time, retirement bonuses and severance packages within a specific time frame when their career is nearing the end so that calculations of their pensions would also include these payouts leading to a considerable boost in their pension amount.
According to a report published by The Tribune, this is a complex way to boost one’s pension and can be highly lucrative for employees but too costly for the taxpayers in general. The officials in the government who have been benefiting by adopting this unfair practice often see it as just using some technicalities so that their rewards can be maximized for their years of employment in public service.
Not a fair game for the taxpayers
However, there are many who strongly feel that this kind of pension spiking activities put undue pressure on the local taxpayers who, unfortunately, have very thin pension funds. The state General Assembly has passed laws in 1963 as well as in 2012 to stem the practice of pension spiking. It also considers that such practices are putting pressure on taxpayers, yet such laws seem to hardly have any effect on the people who are practicing pension spiking till date.
The loopholes playing to the employees benefit
The employees who are practicing pension spiking are highly knowledgeable about the relevant laws as they themselves had helped in creating or enforcing them. So they can easily abuse the prevailing system and manage them tactfully to invoke exceptions. These activities lead to pension boosts in the long run by up to 18%.However, on an average the figure is around 3%.
The Tribune also pointed out that the process can be extremely complicated so entities may not be able to detect what is going on. Since the retirees have an in-depth knowledge of the laws, they know how to use them to the best of their advantage.