Pensions

# Illinois Cops Turned \$850 Into a \$20,000 Pension Boost

## Why did the pension board go along with the scam? Probably because its members are current officers and retirees.

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Thanks to a one-time bonus added to their final paychecks, cops in one Illinois town were boosting their annual pension payouts by more than \$20,000 annually—until a court slammed the loophole shut this week.

The magic trick worked like this: For years, the Chicago Tribune reports, police officers in Countryside, Illinois, had a tradition of giving retiring officers an \$850 bonus in their final checks. It was more than just a nice going-away present. Because pensions in Illinois are calculated based on a retired public employee's "final rate of pay," the pension board for the police department would report retired officers' final paychecks as if they were a normal, bi-weekly paycheck. In other words, that \$850 one-time bonus would be made to look like it was part of the cop's normal pay, duplicated across 24 pay periods per year.

Do the math: \$850 times 24 equals \$20,400. Thus, in the eyes of the pension system, each officer was due a pension based on a final salary more than \$20,000 in excess of the pension actually earned.

Why did the pension board go along with the scam? Probably because its members are current officers and retirees.

The Illinois Supreme Court issued an order Wednesday making the scheme illegal, but it said retirees who have gamed the system do not have to give back their excess pension payments. According to the Tribune, a handful of former officers have used the gimmick to collect more than \$100,000 each in extra pension pay over the course of several years.

As pension gimmicks go, that's a pretty creative one. Like all similar pension schemes, it reveals one of the major flaws with the so-called "defined benefit" pension plans that are most common in the public sector.

In a defined benefit system, a worker's pension is based on a formula that takes into account the worker's final salary (sometimes an average of his or her salary over the last five years or so) and the amount of time they spent working in the public sector. Play around with either of those two numbers, and an employee can end up with a much larger pension than the rules suggest he or she should. In pension parlance, this is known as "spiking."

There are many ways to do spike a pension. A cop in New Jersey spent nine years on paid leave but continued to accumulate seniority to boost his final pension amount. For more than a decade, the New York Police Department ran an elaborate scheme that allowed dozens of cops to qualify for boosted pensions by claiming to be disabled when they really weren't. Until recently, California allowed public employees to literally purchase up to five additional "years" of service when they retired—effectively allowing someone to retire at 60 but with a pension that assumed he or she had worked until 65.

One of the major benefits of switching to a so-called "defined contribution" retirement system, like the 401(k) plans common in the private sector, is that those sorts of games and gimmicks no longer work. Your retirement benefits are the result of your own investments, not a guaranteed payout backstopped by taxpayers, based on a formula that can easily be abused without proper oversight.

The Illinois Supreme Court did the right thing by cutting off the ridiculous loophole in Countryside.

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## 14 responses to “Illinois Cops Turned \$850 Into a \$20,000 Pension Boost”

1. Take away this and asset forfeiture and cellphone smashing then what’s the point of laying your whatever on the line as a first responder?

1. “whatever” = ass. They sit on their ass, they lie on their ass, they are asses.

2. Buying years of service was common in Colorado a while back. I think public employees can still do it, but the state made it cost prohibitive. I know employees are told to change their health plan deductions to after taxes on the highest years to bump the formula.

Our state pension plan was a mess (still is, but not as much). The state should have just switched to DC plans.

3. As pension gimmicks go, that’s a pretty creative one.

And so deserving of a pretty creative penalty.

4. So, that’s what hero’s ‘do’.

5. OK, I’ll be pedantic. Bi-weekly would be 26 times per year. So the effect is actually a little higher than you calculated.

But your point still stands. This is, or was, legalized theft. Good thing the Illinois pension system is chock full of money so they can easily handle this.

6. Oh boy. Now we just need to get rid of that idiotic clause in the Illinois constitution that forbids the decrease of pension benefits.

We’re boned. That and JB the Hutt just got us a fantastic 15\$ statewide minimum wage to make sure that Carbondale, Bloomington, Effingham, Peoria, Moline, Rock Island and Decatur all turn into ghost towns. At least Springfield and Chicago will be okay.

1. And get ready for the Chicago mayor clown show. Seems like everyone’s top policy issue is “social justice”. I am forced to do what I never would have immagined. Vote for a fucking Daley

1. Or you could be like me and not vote any of them.

7. Don’t forget the scam of writing the rules such that benefits are based on total compensation, not base pay. Work a lot of overtime in your last year, use vacation for sick days so you can save them for a final cash out, …

8. Fruad by police officers and nobody is punished. Yep. That’s the Justus system. Disgusting.

9. 99% of cops give the other 1% a bad name.

10. The school my grandmother worked at did something similar. Pensions there are based on an average of your last 3 years of employment, so when you planned to retire in a few years you would tell the administration and they would give you a good size pay raise for your last 3 years, effectively boosting your pension to be equal to your usual pay (before the raise) rather than a percentage

11. Support Local Urban and Rural Police