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Pension spiking

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Pension spiking is a practice in which city employees convert certain benefits such as unused sick time or saved vacation pay to boost their pension benefits. There are two main factors by which pension payouts are calculated: the salary - usually the highest salary - of the employee and the length of service of the employee. Pension spiking can be done either by converting saved sick and vacation pay to boost the salary on which the pension is calculated or by crediting saved sick and vacation time to artificially extend the length of service on which the pension is based. This practice is not illegal in most cities and states and is allowed or prohibited at the discretion of administrators. In Phoenix, the practice is allowed for many public safety workers and executive level employees but denied to rank-and-file employees.

See also: The "Spiking" section of "City of Phoenix Pension Reform Initiative (2014)

Where it's relevant

Pension spiking is happening with many public employees around the country but right now it is especially featured a newly announced pension reform initiative effort in Phoenix. This measure seeks to both change the city retirement system from a defined benefit plan to a defined contribution plan and put an end to pension spiking by employees, especially executive and public safety workers.[1]

Several reports released by the Arizona Republic highlighted the pension spiking of executive-level public-safety officers and managers. The reports featured 10 public-safety retirees that had increased their lump-sum retirement benefits to over $700,000 and their annual pension payouts to more than $114,000 per year. According to backers, the proposed pension reform initiative would prohibit the practice of pension spiking.[2]

Additional reading