An easy solution to Ohio’s double-dipping problem

By Maggie Thurber | for Ohio Watchdog

Double-dipping: When a public employee retires, begins collecting a pension and then returns to the same position — and often the same pay — from which they retired.

It’s legal in Ohio and practiced by a large number of people, but it’s become an issue in a local levy campaign.

The Lucas County Children Services Board has two levies on the books. In November, they’re asking voters to approve the renewal of one of them that doesn’t expire for two more year, combined with an increase. They’re asking for more money.

But last March, Dean Sparks, the executive director and a public employee, retired and began to collect his $70,000 annual public pension. The board immediately rehired him, giving him an 18-month contract with a $10,000 pay cut. His total income is now about $200,000 a year.

The Toledo Blade newspaper, which has long decried the double-dipping practice, wrote several editorials on the issue, calling on Sparks to quit and urging voters to deny the levy request because of the double dipping.

As with any issue, there are mixed feelings, ranging from an “it should be forbidden” to “let everyone do it.”

Clearly the pension is money earned by the employee to which they are entitled whenever they are eligible. No one debates that point.

The problems arise when an employee takes another job after retiring and beginning to collect.

For instance, Edna Brown is a sitting state senator from Toledo. She was employed by the city of Toledo for a number of years and then retired. When she retired, she began to collect her pension under Ohio’s Public Employees Retirement System.

Then she decided to run for elective office — and won, serving as a city councilman, state representative and now as a state senator.

She did what many in the private arena do: Retire from one job and then take another. And like in the private sector, she is earning a new paycheck and still collecting her pension.

But others, like Sparks, have retired and returned to the same job.

In Lucas County, several elected officials who were running for re-election retired after winning in November, began collecting their state pension and then were sworn in to their same position in January. Basically, they took a two-month vacation and started the new year, and their new term, with both a weekly paycheck and their pension checks.

Many taxpayers object to this for a number of reasons, including that it prevents younger employees from being able to advance and contribute to the public retirement system. It’s really more like collecting two paychecks at the public’s expense.

The differing perspectives are really a result of whether the PERS system is viewed like a private employer pension plan or like the public Social Security fund.

Most private pensions don’t have restrictions on employment for former employees. The pension isn’t halted when the pensioner starts getting a new paycheck. And even with a private pension plan, employers and employees still contribute to the employee’s Social Security account.

But with Social Security, your benefits are reduced if you are not at full retirement age and earn more than a specified amount. Once you reach full retirement age, you can earn as much as you’d like.

PERS is really a combination of the two approaches. Public employees in Ohio do not contribute to Social Security, using their PERS contributions as a substitute. Ohio’s pensions are managed by various boards (depending upon the type of public employment, like teachers, police or fire) like private sector pensions are.

To complicate matters even more, many public employees, like teachers, have access to a 403(b) plan, a separate retirement plan that is similar to the 401(k) plan for-profit employers have. Then there is the 457(b) option that allows public employees to set aside a portion of their earnings, pre-tax, for retirement.

All are named for the section of the IRS code that authorizes them and their availability makes the Ohio pension plan seem more like Social Security, with additional retirement plans on the side.

But unlike most private pensions that are a defined-contribution plan, Ohio’s pensions are defined-benefit plans, like Social Security, and that structure is what caused an unfunded debt of $87 billion in 2012.

In a defined-contribution plan, the employer specifies how much they will contribute each year. Upon retirement, the employee account is a set amount of money and that, plus any earnings the account may have in the future, is all that is paid out to the employee.

Ohio’s pensions, like Social Security, are defined benefits, meaning that you are paid a specific amount each year for as long as you live based upon a calculation of earnings over a lifetime. The amount contributed by the public employer and employee is set by law, just like Social Security.

Public employees in Ohio really have the best of both worlds and that, too, upsets taxpayers who are paying for public benefits that are better than the ones they have access to.

Ohio legislators could easily solve the problem.

Since the Ohio public pensions are a replacement for Social Security, just treat employment after retirement like Social Security does: limit the amount of pension paid when the retired employee goes back to work.

This might slow the number of new double-dippers each year, as it reduces the total amount of income the employee would get, making the practice less desirable.

But more importantly, it would show Ohioans that their public servants are being treated the same as they are, rather than getting benefits they could only dream of.

Note: As a former elected official, Maggie Thurber is a participant in the PERS plan and is eligible to collect a state pension upon reaching retirement age.