Pension Crisis

In Los Angeles, Massive Payments to Retirees Don't Even Count as 'Pensions' Anymore

A heavily abused program breaks the limits of what the IRS allows, leaving taxpayers even further on the hook.

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Rich guy
Andreblais / Dreamstime.com

In Los Angeles, retirement payments for some top police and fire officials don't really count as pensions anymore. The city is essentially handing over wads of taxpayer cash directly to retired leaders.

The Los Angeles Times reports that retirement pay for dozens of retired public officials has grown so large that they're slamming into the ceiling of what the IRS allows to fall under the tax breaks of a pension fund. So as public employee pension funds skyrocket on the top end, the city had to make a special "Excess Benefit Plan" fund that has paid off $14.6 million to 110 employees over the past eight years.

The IRS limit for pension fund payments is $220,000 a year. Mind you, California has more than 60,000 retired public workers who earn six-figure annual pensions. There are retirees who are already hitting that ceiling. But in Los Angeles, thanks to a particularly corrupt special retirement program, the problem has escalated dramatically.

Los Angeles has a Deferred Retirement Option Plan (DROP), a special program that allows public safety employees to earn what they'd get paid as pensions for the last five years on the job while still earning their salary. Those pension payments are set aside in a fund and the employees get it all as a massive lump sum when they retire.

The stated justification for the program was to give older public safety employees (police and fire captains, etc.) a financial reward for staying around and "mentoring" younger leaders. This was somehow supposed to be budget-neutral. Instead, the program has been a predictably costly disaster. The Los Angeles Times has thoroughly investigated how public safety employees abuse the program by joining it and then claiming injuries and taking extensive medical leaves. This means they're not working at all, but they're earning both their salaries and their pension pay at the same time. They're not just getting paid for doing nothing—they're getting paid even more.

As Jack Dolan notes at the Times, these lump sum payments from the DROP program are pushing additional employees past the IRS limits for pension payments, and that's also prompting the need for this new fund. That money comes out of the city's pool of revenue, yanking away funding from infrastructure.

One beneficiary of this program is the Los Angeles Police Department's new chief, Michael Moore, who "retired" briefly while a participant in DROP before being offered the top job. He got a $1.27 million payout from DROP and is now also making $350,000 a year on top of his pension. They're now discussing how to reform the system to make it less prone to abuse, but Dolan notes that there's little "appetite among city leaders" to eliminate the program because of the power public safety unions hold in Los Angeles.

Unbelievably, this same weak-willed, spendthrift city government asked voters in November to give them permission to open up and operate a bank, its supporters attempting to lay the blame on Wall Street for the city's financial problems. Voters wisely said no.

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  1. If they were cheap, they wouldn’t be Top Men.

    1. One of my local,municipalities recently spent over $17 million building a new city hall. They put up a bunch of unsupportable figures on their website showing this to be cheaper than leasing. The reality is that the people in charge wanted opulent new digs. At the taxpayer’s expense of course.

    1. Rope. Tree.

      Woodchipper.

      1. Torches, pitchforks.

  2. Taxpayers have no clue how much we’ve been fucked over.

    1. And when it all collapses, capitalism will be blamed for the economic disaster.

      1. When stories can discuss how Venezuela has an inflation rate above 1,000,000% and not once mention Socialism — yeah, you’re right.

    2. I believe many millions of us understand this all too well.

  3. Leaving the taxpayers on the hook?
    So what?
    They’ve got plenty of excess capital to burn.
    After all, who else is going to pay for California’s state and local governments $1 trillion debt?

  4. We need to pass a state bankruptcy law that strips the state of Congressional representation and POTUS votes and allows Congress to break it up. No $$ relief until the state explicitly and officially agrees to that.

  5. If one would do some investigation in all of these progressive political subdivisions (states, cities and school districts) I think that the investigator would find that is how all these areas have worked themselves into a financial problem. The local politicians promise and deliver large perks to the state, city, county and school employees for their vote. Some of those promises are larger pensions at retirement and an earlier and earlier retirement age with ever larger pension payments for every longer post retirement time. Now for the politicians it is no skin off their backs because they got reelected and when the huge tax bill comes due they will not be the politicians who have to find away to raise the taxes to pay for it. Those politicians have long since quit. But like any ponzi scheme those that come in later the more the risk of getting left holding the bag.

  6. I’m quite happy to watch Kalifornia implode… as long as the rest of us don’t have to pay for it.
    This is what Kalifornians have voted for.
    Let them lie in the drug-infested, criminal alien-suffused, feces-on-sidewalk bed they’ve made for themselves.

    1. I’m inclined to agree, although it’s highly unlikely we won’t end up paying for their profligate spending. They already want us to subsidize their sky-high property taxes, and more will follow, you can be sure.

  7. In the final analysis, the people voted for it. It’s a shame that they’re so stupid.

    1. Never underestimate the stupidity of the voters.

  8. It is mind boggling to think so many people get these huge pensions, how can this not end badly? I will retire next year with no mortgage and 3,000 dollars a month counting SS and pension and even though I will have to buy a supplemental policy for healthcare I will be all right. I can’t for the life of me understand how their crazy pension plans in California have lasted this long without exploding.

  9. California rife with hypocrisy, fiscal malfeasance, kleptocracy, parasitic exploitation, & systemic corruption.
    Such exploitation applies to this military retiree; my unfortunate experience with evil, corruption, & kleptocracy in San Diego, CA; transitioning into poverty & austerity amid crime & corruption while abusive negligent criminal individuals & parasitic organizations (Veteran’s Administration, city & county along with state cronies, fraudulent foundations, evasive NGOs, …) indulged at my health, well-being, & expense; enduring injury, injustice, rights violations, parasitic exploitation, negligence, fraud, theft, abuse, & harm without protection or exposure since suppressed & obscured by misinforming propaganda promoted via complicit media; considered a budget liability, physically harmed & exploited as my earned benefits & entitlements are heisted by kleptocrats & terrorist agents with my blood on their hands.
    All California reps ignored my requests for assistance, protection, & involvement during incidents of injury, crime, injustice, & growing disparity then indulged beside forced into homelessness & property stolen, still not provided deserved assistance & recovery, legal protection, or medical treatment for injuries & life-threatening complications.
    Battlefield America: War On the American People; John W. Whitehead
    7406840034
    facebook.com/groups/996044080457069?view=group

  10. California economy is an illusion, rife with debt, kleptocracy & fiscal malfeasance.
    California, like ScAmerika ecchonomy, is an illusion rife with exploitation, distortion, bail-out, subsidies, fraud, fiat, injury, injustice, & blood indulging delusion, socio-pathos, psychosis, fiscal malfeasance, & kleptocracy.
    Fitting San Diego’s character of hypocrisy, insincerity, ethical & moral corruption, & kleptocracy associated with con-artists, thieves, criminals, & kleptocrats; promoted & indulged abuse, injustice, harm, injury, crime, exploitation, fraud, & persecution of an innocent honorable USN retiree; indulged theft of his property & forcing him onto street & into homelessness.
    Dishonest & parasitic dubious non-profits, fraudulent foundations, evasive NGOs, & Veteran’s Administration abound amid kleptocracy & corruption. Investigate & expose hypocrisy, fraud, cronyism, & profiteering exploitation amid the homeless crisis; especially Veteran’s Administration, city & county, along with parasitic fraudulent foundations, dubious NGOs, & supposed non-profit scams of San Diego, CA.
    The influence & impetus to resolve corruption evident from will & righteous cause exhibited by French citizens, but are USA citizens concerned about injustice & socio-economic disparity & courageous to confront systemic corruption & impose accountability?
    Don’t externalize but recognize, expose, & resolve domestic violations. 7406840034 facebook.com/groups/996044080457069?view=group

  11. Pretty soon we’ll have to build that wall. Between us and California.

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