San Diego’s Shocking $7.3M Pension Bonuses: What You Need to Know!
San Diego’s pension saga continues as the city rolls out its controversial retirement bonuses, a move that has set its system back around $160 million since these bonuses first appeared in the 1980s. The buzz around this annual payout is palpable, especially for the nearly 8,700 retirees who just received checks averaging a little over $700 last month, with some lucky individuals pocketing as much as $1,594. This bonus is piled on top of their regular pension checks, making for a sweet deal!
This year alone, the total bonuses hit a whopping $7.3 million, matching last year’s record high. But there’s a twist: for employees in the city’s deferred retirement option plan, who can keep working for up to five years after officially retiring, their bonuses weren’t in their hands just yet. Instead, those funds are securely tucked away in their retirement accounts, waiting patiently until they fully hang up their hats.
Yet, not everyone is cheering. Critics argue that with the city’s pension system grappling with a staggering $3.5 billion debt, those bonus dollars would be better spent on investing to lighten that financial load rather than being distributed to retirees. In fact, back in 2004 — following a scandal that earned San Diego the infamous title “Enron-by-the-Sea” — a cap was placed on how much retirees could receive in bonuses. Newcomers to the workforce post-2005 were also left out of the bonus bonanza, but those who had already put in their years couldn’t be disqualified, as the bonuses are considered a vested benefit.
Despite the cap and the new rules, the total payouts keep climbing each year. This growth is fueled by a formula that compares the pension system’s investment earnings against its operational costs. And with $592.3 million in realized investment earnings last fiscal year, the trigger was pulled for those sought-after bonus payments.
Since 1984, bonuses have been awarded every year with a few exceptions, initially introduced to combat the soaring inflation of the late 1970s that threatened retiree benefits. Proponents argue that many city workers don’t receive Social Security benefits, making these pensions — with the average annual payout resting around $60,000 — a critical lifeline for them. In fact, while some extraordinary cases see pensions soar into six figures, the typical retiree can certainly count on a decent sum.
This year’s $7.3 million in payouts also benefits retirees from the San Diego Unified Port District and the Airport Authority, as their pensions are managed through the city’s system. The payout pool even extends to the surviving spouses of deceased retirees, ensuring they too receive some financial support.
Interestingly, even as the overall payout grows, the average bonus for individual retirees has taken a minor dip in recent years due to a rising number of recipients. From $716 in November 2021 to a consistent $710 this year, the average per retiree payout is slowly shrinking. The number of retirees benefiting from these bonuses has also seen an uptick, rising from 8,221 in 2021 to 8,676 this year, according to the pension system’s associate general counsel.
While these bonuses are cleverly wrapped into the November monthly checks, some skeptics have dubbed it a “13th check,” highlighting it as an additional payout on top of the usual 12 monthly installments retirees receive. The 2004 cap limits bonuses to $30 for each year of service for employees who retired after June 30, 1985, meaning a worker with 30 years of service can’t receive more than $900. For those who retired earlier, the cap is set at $75 per year.
Creating this cap wasn’t without its challenges, leading to litigation that ended with a $10 million settlement for affected workers. And for retirees from the port or airport, the cap initiation dates differ: October 2005 for the port and October 2006 for the airport. The ongoing debate over these bonuses raises important questions about fairness, sustainability, and the future of San Diego’s pension system.