Retired Firefighters Ordered To Repay Pensions
Minneapolis Star Tribune via YellowBrix
May 20, 2010
MINNEAPOLIS, MN – Two pension funds must collect $76 million in overpayments that went to retired Minneapolis police officers, firefighters and their survivors.
A judge has ordered two Minneapolis pension funds to recover about $76 million in overpayments to retired police and firefighters or their spouses.
Under the order, the 860 retired police officers or their survivors must repay the city an average of $60,000 each, and 563 beneficiaries of the firefighter fund must repay an average of about $43,000 each.
City officials who have warned that the funds were headed toward insolvency hailed Monday’s ruling by Hennepin County District Judge Janet Poston. But it’s a further blow for the retirees who rely on the funds, which have been closed to new hires since the mid-1980s.
“I am upset over the unfairness of it,” said Marlies Mack of Columbia Heights, widow of a slain officer.
“It’s not over,” warned police retiree and former City Council Member Walt Dziedzic. “It’s a shame after all those people gave all they had for the city for all those years. I’ll trade them the two bullet wounds I’ve had in my leg and all the operations I’ve had since, for my health.”
There was no immediate word Tuesday from officials of the two funds on how they’d try to collect the overpayments. They could, for example, seek to reduce future benefits for a time. Poston gave them until June 4 to devise a method and said they must start collecting July 1.
Under state law, the money won’t be returned to the city, but will be applied toward reducing the deficit in each pension fund, thus reducing future city payments.
Poston ruled last November that the funds overcharged the city by including certain fringe benefits when calculating the pay level on which individual pensions are based. Pensioners already were steamed about that order, which their funds plan to appeal.
That ruling saved the city at least $10 million annually going forward. But it cut police pensions by 12 percent or about $427 monthly, and firefighter pensions by 9 percent or about $340 monthly, effective Jan. 1. Poston’s new order requires the funds to make plans for recouping overpayments back to the year 2000.
The pension issue veered into the political arena last winter when city police and firefighter political funds sent a letter to past DFL caucus attendees ripping Mayor R.T. Rybak for their pension cuts during his run for party gubernatorial endorsement. Rybak fired back Tuesday.
“The members of these funds should be upset at the lawyers who have made excessive amounts of money to give them very bad advice,” Rybak said. “These lawyers have dragged the funds’ members through years of litigation to defend a practice that Judge Poston has once again ruled is improper. Her ruling strikes the right balance between our obligation to pay our retirees as much as they have earned and doing justice for our taxpayers.”
Walter Schirmer, executive secretary of the firefighter pension fund, said it plans to huddle with attorneys on the ruling next Monday. Larry Ward, president of the police fund, couldn’t be reached.
The city’s push to force a recalculation of police and fire pensions is part of a larger city strategy of trying to cope with burgeoning costs for its three closed pension funds and keep current on contributions to statewide funds for younger city employees. Its levy for older pension funds is projected to zoom from $15 million this year to $50 million in 2015, consuming large shares of anticipated property tax increases.
Betsy Hodges, who chairs the City Council’s budget committee, pushed for pension changes. “It’s another good outcome for the city,” she said of Poston’s ruling. “At this point, the members and the boards of those funds have a lot of decisions to make by June 4.”
According to pension fund valuations, the average police pension was $47,467 in 2008, with surviving spouses averaging $26,818. The average retired firefighter drew $43,553, while survivors got $24,150. Unlike many pensions, which are based on the highest salaries a pensioner was paid, those of police and fire retirees are based on the pay of a top-grade patrol officer or firefighter, regardless of rank.
Poston said the city can’t reclaim overpayments directly but that the pension funds have a fiduciary duty to collect.