The RTA board has approved a new ordinance to prevent non-union RTA, Metra and Pace employees from "pension spiking" - bumping up their pension pay-out in their final year of service.
Under the new ordinance, which takes effect Jan. 1, pensions will be based on the base rate of pay, not all compensation on a employee's W-2 form. This means extra pay like overtime, bonuses and fringe benefits would be excluded from the pension calculation.
The ordinance also adds a provision subjecting the pension benefits of participants to forfeiture upon conviction of a felony related to service with a transit agency.
"Riders and taxpayers deserve a system that has transit employees who are ethical and accountable," said Patrick Durante, chair of the RTA Board's audit committee. "By making these key changes, the likelihood of any one individual taking advantage of the system is reduced, and the public can have the confidence that resources are being used appropriately."
RTA acting general counsel Clinton McHugh said the reforms were derived from a recommendation by RTA auditors and not in response to a particular problem - such as the million dollars in compensation former Metra executive director Philip Pagano received in his last year of service. McHugh said the reforms were "sensible protections" against possible problems.
Pensions are based on an average of the last three years of an employee's pay, so a significant pay increase in the last year of service could significantly increase a pension payout.
McHugh said the reforms wouldn't have impacted Pagano's pension pay-out, because his base pay was already over an Internal Revenue Service cap. Pagano's cap, if he had retired instead of killing himself May 7, would have been limited to $170,000 even with all the extra pay he got in his last year.
However, if Pagano had been convicted of a felony, he would have been impacted by these reforms if they had been in effect at the time of his conviction. Pagano was under investigation for stealing vacation pay from Metra when he took his own life.
Pagano's widow is receiving $80,000 a year in pension from Pagano's service as of Oct. 1, and will continue to receive it until her death, McHugh said, with possible increases as the IRS cap goes up. Metra is still figuring out whether it can take back from Pagano's estate some funds, including up to $475,000 in unearned vacation pay and $127,000 he had borrowed.
The reforms also wouldn't have applied to former Metra deputy executive director G. Richard Tidwell, who received nearly $1.25 million in salary, bonuses and benefits from Metra in his last year of service in 2009. Tidwell's base salary for his last three years of salary averaged over $220,000, and his pension is limited by the cap to less than $200,000.