Employment Limbo and Public Sector Pensions

A deputy fire cheif in Florida has been officially released from his previous job as a fire chief in Washington, D.C. He resigned in an ambiguous state, known as,  “leave without pay status,” which enabled him to take a new job in  Florida while reaching the age of 50 to collect his benefits from his D.C. employer immediately (rather than waiting til age 55).

Nearly all public sector plans in the U.S. are defined benefit plans. In a defined benefit system an employee’s retirement earnings aren’t very “portable,” as they are in the defined contribution system most common in the private sector. In other words, when leaving a  public sector job, it can be difficult to impossible to roll previously earned benefits into a new plan. The deal worked out between the fire chief and the D.C. department may be less an example of corruption, than a comment on the incentives present in its pension system.