‘Pension Padding’ Is Widespread, Costing Taxpayers Millions, Cuomo Asserts

Some workers across New York are significantly inflating their pensions by dramatically increasing their overtime hours in the final few years of employment, according to a preliminary report on pension padding just issued by N.Y. Attorney General Andrew Cuomo. 

As part of the investigation, Cuomo’s office requested payroll data from 64 state agencies, local agencies, municipalities, and authorities that participate in the state’s Common Retirement Fund. The preliminary report analyzed data from 50 of those 64 employers representing 3,688 retirees from 2009. According to Cuomo, the data indicates that employees are boosting their overtime to inflate their pension benefits, which are based on an employee’s total income, not their base salary. Specifically, according to Cuomo, the investigation found two patterns that demonstrated increased accumulation of overtime in many workers’ final years of service. The first pattern is employees who start getting overtime only when they near retirement. The second pattern is employees who greatly increase overtime only when they near retirement; in some instances, average annual overtime hours in the period approaching retirement increased by more than 10 times the amount in earlier periods. The report found that 28 of the 50 employers from 13 different counties across the state showed one or both patterns, and 12 of the 28 employers showed both patterns.

According to Cuomo, examples of the first pattern, involving employees who start working substantial amounts of overtime only when they are near retirement, include:
 

• A highway maintenance employee went from no overtime to working 539 hours of overtime in the final years before retirement.
• A police officer went from no overtime to working more than 800 hours of overtime in his final years before retirement.
• A Deputy Commissioner of Civil Defense/Disaster Preparedness went from no overtime to working 1,629 hours of overtime in the final years before retirement. The data shows that this employee took in more than $50,000 in overtime pay the years before his retirement and had twice as many overtime hours as his co-workers. 

Cuomo’s report gave the following examples of the second pattern, involving employees who worked some amount of overtime during their career, but showed a substantial increase in the amount of annual overtime hours during the period approaching retirement: 
 

• A 2009 retiree who was a shovel operator averaged 144 hours of overtime annually from 2002-2005. From 2007-2008 that employee averaged 820 hours of overtime annually.
• A 2009 retiree who was a journeyman operator averaged 150 hours of overtime annually from 2002-2005. From 2007-2008 that employee averaged 551 hours of overtime annually. The average annual overtime hours for other employees was around 300 hours.
• A 2009 retiree who was an operator group supervisor averaged 434 hours of overtime annually from 2002 to 2005. From 2007-2008 that employee averaged 1,191 hours of overtime annually. This employee had a $69,000 annual salary and then received $67,000 in overtime pay in the year prior to retirement. 

At a minimum, according to Cuomo, “this data confirms that employees are indeed inflating their pension benefits by boosting overtime as they near retirement and may be engaging in pension padding.” He explained that if only two percent of new pension recipients followed some of the practices found in his investigation, “taxpayers could face an additional $120 million in pension benefit payments over the next 20 years.” At five percent, “this could mean an additional $300 million over the next 20 years.”
 
Cuomo’s pension padding investigation is being conducted by Assistant Attorneys General Lauren Ellis, Renée Jarusinsky, and Jessica Silver, and Director of Economics Kitty Kay Chan, under the supervision of Deputy Chief of the Public Integrity Bureau Monica Stamm and Special Deputy Attorney General for Public Integrity Ellen Nachtigall Biben.