Legislation would stop pension ‘spiking’

Legislation that would cap school employee pension payments could soon get a vote on the Ohio House floor.

The bill, which came out of the House Pension Committee on Wednesday, would stop the current system of School Employee Retirement System members from using their best three-year average of compensation to determine pension payouts when those years are disproportional to traditional pay raises.

The pension plan is a statewide defined benefit plan that provides retirement, disability and survivor benefits to nonteaching employees in the state’s public schools. It covers bus drivers, custodians, administrative assistants, food service providers and aides to treasurers and business administrators.

Rep. Adam Bird, R-New Richmond, said that current practice allows individuals to have higher years in the system significantly higher than expected from traditional raises, creating an imbalance between contributions and payouts.

In those cases, Bird said, other current members must cover what he called inflated benefits.

“I am proud to say that this legislation has no opponents. Simply put, House Bill 146 aims to align with the premise that a member’s contributions plus investment earnings over time should fund the member’s pension,” Bird said. “We want to ensure all retirees get the compensation they deserve.”

To stop “spiking,” the bill would require the board to create a cap by determining the actual amount of an employee’s contribution and then multiplying it by a number set by the board.

Bird said the cap would not impact normal salary growth, promotions or job changes.

Richard Stensrud, executive director of the School Employee Retirement System, testified in support of the plan, saying the system’s board has been concerned about spiking for years.

“SERS’ existing tools do not protect against this kind of spiking,” Stensrud testified. “To enhance the system’s defenses against such situations and to help assure that benefit spiking does not diminish the system’s sustainability, the SERS board determined to seek the implementation of a Contribution Based Benefit Cap tool. To that end, we are pleased to have worked with Representative Bird on the introduction of HB146.”