State Controller's Office Review "Did Not Identify Pension Spiking" in CalPERS Public Agencies
September 09, 2014
External Affairs Branch
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
CalPERS Efforts to Monitor Public Agencies Increased in Recent Years
SACRAMENTO, CA - A review conducted by the State Controller's Office (SCO) "did not identify pension spiking" among the dozen public agencies included in the review that contract with the California Public Employees' Retirement System (CalPERS).
The review, which covered a 2-year period (July 2010-June 2012), recommended no material changes to the Pension Fund's efforts to audit agencies for pension spiking and acknowledged CalPERS had effective processes in place to recoup overpayments.
"As we expected, the Controller’s review did not identify any pension spiking," said Rob Feckner, President of the CalPERS Board of Administration. "We agree on the importance of a proactive and automated system to detect pension spiking. Long before the Controller’s Office began their current review, CalPERS saw the need for a 21st century, state of the art technology system and we successfully implemented it in 2011. That is one of the reasons why the SCO’s report 'did not identify pension spiking' among the 11 agencies they reviewed. We further agree we need a larger audit staff, which is why we significantly increased it and plan to continue to increase it in the near future. We look forward to our continued partnership with the Controller and California’s public employers to monitor and enhance compliance with the law."
Not cited in the review report, CalPERS efforts to monitor compliance of contracting agencies include the following:
- CalPERS has significantly increased audit staff since June 2012 and, in the last year alone, has doubled the number of audits of contracting public agencies to 99.
- CalPERS provides comprehensive education for employers and offered more than 600 training courses last year.
- CalPERS has procedures in place to review compensation of active employees for pay increases and inappropriate reporting by employers.
- CalPERS targets public agencies that have highly paid employees with reported earnings exceeding $245,000 annually in an effort to optimize its review of agencies.
CalPERS is also developing a business intelligence program using technology and data analytics to identify membership and payroll reporting anomalies across its membership. This will allow the Pension Fund to focus its auditing efforts on contracting agencies most at-risk for reporting errors.
Lastly, one of the practices that many public pension systems (including CalPERS) use is called "Employer Paid Member Contributions (EPMC)." While this practice is still generally available for the "classic" employees who were first hired by January 1, 2013, the recent Public Employees' Pension Reform Act (PEPRA) prohibited EPMC for "new hires."
"CalPERS shares a partnership with our local government employers who bear the primary responsibility for complying with and accurately reporting employee compensation in compliance with the law," said Feckner. "We welcome suggestions on how to improve our oversight role."
CalPERS is the largest public pension fund in the U.S., with approximately $300 billion in assets. CalPERS administers health and retirement benefits on behalf of 3,090 public school, local agency, and state employers. There are more than 1.6 million members in the CalPERS retirement system and more than 1.3 million in its health plans. For more information about CalPERS, visit www.calpers.ca.gov.