Spiking remains a problem
When it comes time to determine your career earnings for retirement, “caveat emptor” – or buyer beware – has never been more important.
Although CalSTRS (California State Retirement System) is doing everything it can to encourage community college and K-12 districts to accurately report earnings, it is ultimately the employee’s responsibility to make sure that earnings reports are correct when retirement nears.
This bit of advice may come in handy for those planning ahead, especially since a number of retirees have found themselves having to return much-needed pension funds to CalSTRS due to errors made in reporting earnings.
Although the issue isn’t widespread, it can be a shock when it happens. In one recent case, a retired teacher was forced to return $44,000 to CalSTRS because of errors that had been made in her earnings report. Generally, the problems came up in the reporting of “extra compensation” such as coaching stipends or extra duty assignments. Districts do not always understand the idea of “creditable compensation” and have put that money into a retiree’s total compensation, causing a “spike” in earnings that erroneously increases retirement benefits.
"This is something we as employees must pay attention to,” says Phyllis Hall, a CCA board member on CTA’s Retirement Committee. “Extra duty or working an extra period must go into the Defined Benefits Supplement account, otherwise it’s considered spiking.”
Although it isn’t common, there have been instances where it appeared districts intentionally spiked the earnings of employees to incentivize them to retire. CTA’s Legal Department has gone after these districts to force them to change their practices.
CalSTRS has been doing everything it can to prevent misreporting by conducting more reviews and fining and penalizing districts that engage in the practice. However, many problems are caused by increased turnover in district staff as well as downsizing at the district level. Still, employer reporting has improved so it is likely there will be fewer problems as current CTA members head into retirement.
“Remember, your retirement benefits are based entirely on what employers report,” said Ed Derman, deputy chief executive officer of CalSTRS. “Don’t assume if it’s on the report, it’s accurate.”