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Audit Shows CalSTRS Pension Spiking Controls Inadequate

Aired 9/5/12 on KPBS News.

An audit by California’s state controller says the pension fund manager for California teachers failed to investigate possible abuses. The findings come on the heels of public employee pension reforms passed by the legislature.

An audit by California’s state controller says the pension fund manager for California teachers failed to investigate possible abuses. The findings come on the heels of public employee pension reforms passed by the legislature.

The California State Teachers’ Retirement System—or CalSTRS— instituted a computer program a few years back to flag possible pension “spiking.” That’s when employees get a big salary jump shortly before retirement to increase their pension payout.

The Controller found that between 2009 and 2011, CalSTRS failed “to review, verify or follow up” on such cases flagged by the automated system. The Controller urged CalSTRS to scrutinize all instances of possible pension spiking and to add more auditors for the task. During the period reviewed, the fund conducted just 40 audits of the 1900 agencies it manages.

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 investigated hundreds of suspected cases of pension spiking, and confirmed 28 instances of “inappropriate benefit enhancement.”

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