Some California state workers are hoarding vacation days to get $400,000 cash payouts at retirement

retirement californiaCalifornia state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California, October 21, 2009.REUTERS/Max Whittaker

  • Hundreds of California state employees were paid a total of $300 million for unused vacation days when they retired last year, reported the LA Times.
  • A prison surgeon in California walked away with the biggest payout - $456,002 before taxes.
  • Many of California's public employees receive a pension on top of any unused vacation time payout.

More than 450 California state employees retired with six-figure bonuses last year when they cashed out unused vacation time, the Los Angeles Times' Melody Gutierrez reported

California cut checks worth a total of nearly $300 million to retiring employees in 2018, a Times analysis of state payroll data found. Employees' salary at the time of retirement determines how much they're paid for the unused leave, not their salary when the vacation time was accrued.

The state formally caps total vacation balance at 640 hours, but little enforcement of the rules and an increase in the number of retirees has led to a 60% leap in the number of six-figure payouts since 2012, Gutierrez reported. 

A prison surgeon in California walked away with the biggest payout - $456,002 before taxes - last year, while a government transportation engineer received about $405,000, which was boosted by a 4% raise he received the year before he retired, according to the Times. The payout was more than two times his annual salary.

Read more: It's about to get easier for millions of California workers to save for retirement

For some, the payout is in addition to a pension. According to the Public Policy Institute of California, 65% of state employees are covered by one of two public pension programs, which pay retirees specific monthly benefits from a pool of employee and employer contributions, as well as investment returns.

Pension benefits are calculated based on years worked, salary, and age at retirement. But amidst a quickly expanding and aging population, California has begun phasing out pensions as they come at a huge cost to taxpayers

 

Gutierrez reports, though, that the payout data may be grossly understated, as it doesn't account for legislative employees or workers in the University of California or California State University systems. It also doesn't include information for employees who decide to run the clock on their vacation days before officially retiring, like J.J. Clinic, a California Public Employees' Retirement System (CalPERS) worker himself.

Perhaps because of his experience on the job, Jelincic chose to receive vacation pay instead of a lump-sum payout, the Times reported, and has technically been on vacation for more than a year, during which he received a 4% raise. On paper, Jelincic is increasing his state service time and thus increasing the value of his pension.

Read more: A retirement account can reduce your tax bill, but the type you decide to use determines when

Americans on the whole have been taking less time off in recent years with the emergence of a hustle culture that prizes around-the-clock connectedness and long work days. But for some jobs, skipping vacations is born out of necessity.

"Many who received large payouts worked in prisons or public safety positions, where staffing shortages and emergencies can make it difficult to schedule vacations," Gutierrez wrote. As of 2017, the departments with the highest value of unused vacation hours were the Department of Rehabilitation and Corrections, the California Highway Patrol, and Caltrans.

"I would have rather had been taking time off than taking a payout," Kim Zagaris, a former fire and rescue chief who retired with a pre-tax bonus of $216,000, told the Times. Still, the Times analysis found the majority of workers do indeed take vacation, as most payouts for the previous year were under $5,000.

Read the full article at the LA Times »

Disclosure: Axel Springer is Business Insider's parent company.

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