HELENA - A state retirement board on Friday shot down a request from retiring University of Montana President George Dennison to increase his pension based on his recent 35 percent pay increase.
State rules prevent big salary increases near retirement from causing a similar increase in pension payments. But Dennison was asking the Teacher's Retirement Board to grant an exception to the 10 percent cap on such last-minute pay hikes.
The board rejected the request, saying it would not be appropriate for a pension system facing a shortfall to grant Dennison an increase of roughly $200 a month. Board members said the contributions Dennison and the Montana University System paid were based on lower salaries and wouldn't cover the cost of a higher pension based on a salary he received for just a few months.
The pension system faces massive shortfalls projected over the next 30 years and is the subject of legislative overhaul plans. Concern has been raised about big pensions for the highest-paid state employees and the effect of "salary spiking" for some workers shortly before their retirement.
Dennison, who will retire in a couple of weeks when University of Montana Provost Royce Engstrom takes over, was given a raise of about $75,000 in March, increasing his annual salary to $280,000. The increase was granted to match the salary of the new Montana State University president, Waded Cruzado, a traditional move of university officials who want both school heads paid the same.
The extra pay received over the last six months would hike Dennison's pension about $200 a month, said David Senn, executive director of the Teachers' Retirement System. Senn said he had not calculated the total amount of Dennison's pension, which won't be certain until he actually retires.
But Dennison can still get the $200 a month pension increase if he pays for about half of its anticipated cost, an upfront fee of about $9,000 that would go into the pension investment scheme. The university system would be obligated to match the $9,000 so the pension system remains whole, Senn said.
The university system argued Friday that the pension system should pick up the tab and pay for the increase because it allows exceptions for salary increases given to a group of employees. It said the hike for both the MSU president and Dennison represented a group increase and was not a special deal for Dennison.
But the retirement board said the system is not designed to pay out pensions based on sizable, last-minute pay increases.
"That's a substantial hit to the retirement system," said board member James Turcotte. "We do not assume a person would get that kind of huge salary increase."