July 7, 2010 / 6:50 PM / 9 years ago

Public workers spike pensions with excess overtime

NEW YORK (Reuters) - Some New York public employees are spiking their pension benefits by working hundreds of hours of overtime as they near retirement, Attorney General Andrew Cuomo said on Wednesday.

For example, a police officer with a history of zero overtime worked more than 800 hours of overtime in his last years on the job, the Democratic gubernatorial candidate said in a report.

The pension benefits that state and local employees qualify for often are partly determined by how much they earn in the last few years at work.

This use of overtime, called pension padding, hurts New Yorkers as each year their taxes contribute $2.5 billion to the state’s Common Retirement fund, Cuomo said.

The recession and sliding stock prices has made it much harder for states, counties, villages and towns around the nation to afford the pension benefits they promised workers, which sometimes are richer than private sector equivalents.

Yet constitutional, statutory and contractual hurdles prevent many states from slashing pensions for retirees or current workers, which means they can only squeeze how much future workers eventually collect.

Cuomo, citing payroll data from 50 state and local agencies, municipalities and authorities, found their employees sometimes only start working lots of overtime shortly before they retire or greatly increase their overtime in that period.

One supervisor who retired last year averaged 434 hours of overtime each year from 2002 to 2005. But his average overtime shot up to 1,191 hours from 2007 to 2008, Cuomo said. The worker’s overtime in the year before he retired was $67,000, just $2,000 less than his annual salary.

“Our ongoing investigation into pension padding has so far identified problems that transcend occupation, region, or job title,” said Cuomo, who is expanding his investigation by seeking payroll data from another 23 public employers. He already has sought this information from at least 64 entities.

The public would pay an extra $120 million in pension benefits over the next two decades if just 2 percent of new retirees pad their pensions, Cuomo said. That figure rises to $300 million if 5 percent of the workers adopted this method.

The solutions he proposed included capping overtime, limiting it through better management, and not reserving it for the workers with the most seniority.

Reporting by Joan Gralla; Editing by Andrea Ricci

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