Bill Zettler at Champion News looks at one of the little-known issues with public pensions — the service time used to calculate the benefit is not the time actually worked.
As he notes, there are two ways this happens in the Illinois Teachers plan:
Why is that? Well teachers get pensions paid on “Service Credit” not actually on the years worked in Illinois. “Service Credit” is a concept that boosts pensionable years worked in IL with giveaways that have been added over the years to increase teachers’ pensions for no reason other than they are teachers.
I know of no private sector system where the workers receive pensions based upon more years than they have actually worked.
Service Credit scam 1: pensions paid on 75,000 years of sick leave never worked.
The major way to get Service Credit is via sick days. Every teachers’ contract contains an allowance for “sick days” averaging about 12 days per year. If the teacher doesn’t take the days off as sick leave (most of the suburban schools have 2-3 personal days on top of sick days so they can use those for real sick days) they can accrue them for up to 2 years Service Credit when they retire.
Service Credit scam 2: “Optional Service Purchase”: Pay $63,000 get $1.2 million.
Teachers may also “purchase” Service Credit, at an extreme discount, for teaching previously in other states.
Retirees have paid nominal amounts for 82,700 out-of-state work that by definition is not Illinois work. If it’s not Illinois work why do Illinois taxpayers have to pay pensions for it?
Why do Illinois taxpayers have to pay pensions for work not done at all or done in another state?
Very good questions.
These features are not necessarily restricted to Illinois. “Air time” (buying “Service Time” in a new job based on a job worked elsewhere) is something all over the place, and it can be abused in a big way. The amount “charged” for air time is usually well below what it will actually cost (esp. given the low retirement ages).
With regards to sick time being accrued for pension benefits, in many private companies there is a maximum number of sick days allowed to be rolled over from one year to next…and if you don’t use them, they’re gone.
With benefits like is, even with generous assumptions and smoothing to dampen effects, is it any wonder the funding ratio is below 50%?