Controller: Teachers retirement fund failed to investigate possible pension abuses

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A report issued by California's Controller on Wednesday says that the California State Teachers’ Retirement System (CalSTRS) failed to investigate possible abuses beginning in June 2011 and lasting over two years.

CalSTRS instituted a computer program a few years back to flag possible pension “spiking” when employees get a big salary jump shortly before retirement to increase their pension payout.

But the Controller found that between July 1, 2009 and June 30, 2011, CalSTRS failed “to review, verify or follow up” on such cases when they were flagged by the automated system.

The Controller urges CalSTRS to scrutinize all instances of possible pension spiking and to add more auditors for the task. During the period reviewed, the fund conducted an average of 40 audits on the 1,900 agencies it manages.

The Controller says that at that rate CalSTRS would audit each agency once every 48 years.

In a statement, CalSTRS officials responded that they take pension spiking “very seriously” and have already implemented many of the Controller’s recommendations.

Last December, the fund flagged 270 suspected cases of pension spiking, and confirmed 28 instances of “inappropriate benefit enhancement.”

The findings come on the heels of public employee pension reforms — enacted by the legislature to prevent abuses and lower costs.

The Controller plans to conduct a similar audit of the pension spiking prevention effort at the state's largest pension fund, the California Public Employees Retirement System (CalPERS).

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