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August 31, 2010

For More Information, Contact:
Melissa Figueroa (916) 651-4011
Phil Yost (650) 688-6384


SACRAMENTO – Legislation authored by State Senator Joe Simitian (D-Palo Alto) to curb “pension spiking” in the state’s two largest pension systems has passed the Legislature. Senate Bill 1425, which pertains to the California Public Employees’ Retirement System and the California State Teachers’ Retirement System, now moves to the Governor’s desk.

Pension spiking is the practice of boosting an employee’s final salary before retirement by cashing out on vacation time or administrative leave, among other methods.

Because pensions are often based on final-year compensation, inflating end-of-career incomes artificially boosts pensions throughout retirement.  “For the most part,” said Simitian, “the process is entirely legal.  Simply put, the rules now in place encourage employees to game the system.”

A 2007 study by San Francisco’s non-profit Pacific Research Institute indicates that pension spiking costs California taxpayers roughly $100 million each year.

“Prior pension legislation was never intended to authorize the pension spiking we are seeing,” said the bill’s joint author, State Senator Lou Correa (D-Orange County). “It’s an abusive practice that robs Californians of vital services and precious dollars.”

Senate Bill 1425 requires that an individual’s pension be based on a set of criteria that prevent employees from padding final salaries with one time bonuses, end-of-career promotions, and accrued vacation time. 

“Pension spiking does a disservice to the public, who ultimately foots the bill; and it does a disservice to other public employees who rely on the resources and solvency of the system for a secure retirement,” said Simitian.

High-profile abuses also undermine the public’s confidence in the entire system. Fewer than 1% of CalPERS retirees receive a six-figure pension; the system’s average pension is $25,212 a year. 

“Most of the folks I talk to,” noted Simitian, “don’t begrudge employees a reasonable pension to provide some security in their later years.  But they are understandably angry when they hear of these off-the-charts payouts – even as our state and our residents are struggling to make ends meet.”

Senate Bill 1425 also addresses the issue of revolving door “double-dippers” – employees who retire with substantial pensions, and then resume full-time employment, often at the same agency, in the same role, immediately after their “retirement.”

Simitian said he understands the occasional need of a public agency to bring back a talented employee to fill a short term vacancy or provide specific expertise.  But, he said, the current system encourages employees to cash out early and become immediate and continuing double-dippers, hurting the public and other retirees in the process.

For SB 1425 to take effect, the Legislature must pass, and the governor must sign, a related pension bill, AB 1987 by Assembly Member Fiona Ma (D-San Francisco), which curbs pension spiking in local pension funds regulated by the County Employees’ Retirement Law of 1937.

For more information on SB 1425, visit