Can errors cut public pensions, force repayments?

CONCORD — A nightmare for retired government employees was aired before an overflow crowd at a Contra Costa County pension board hearing this week — fear not only of a pension cut but of being forced to repay a pension overpayment.

Gayl Belfor said her pension is $2,377 a month, far less than the big pensions received by two fire chiefs that triggered a legal review of the policies of the Contra Costa County Employees Retirement system.

If the board wants a “clawback” or repayment of the pension payments received under the decade-old policy questioned in the review, Belfor said, she calculated that she would owe $15,200.

“Where am I supposed to get it?” Belfor told the board “And I won’t expect an answer from you, because I sure as hell don’t have it.”

An emotional plea came from a retired San Ramon firefighter, who said he helped pay for his pension and earned his retirement by giving “my heart, my soul, my leg, my knee” while on the job.

“I’m pissed,” said Jerry Fouts. “I’m really angry that you are threatening my retirement. I’m scared just like everyone else in these harsh economic times.”

A woman who described herself as a member of the “general public,” feeling like “chopped liver” among the hundreds of active and retired government employees at the meeting, said overpayments are recovered on Social Security and tax returns.

“If there is any wiggle room the board has it would be waiving interest on those past payments,” said Wendy Lack.

It’s not clear whether the Contra Costa situation is quirky or the cutting edge of problems that may surface in other public pensions, particularly in the 20 county retirement systems that operate under a 1937 law.

A columnist for the Contra Costa Times, Daniel Borenstein, revealed last year that the pensions of two fire chiefs are well above their final salary. (Borenstein continues to dig, reporting this week on a $92,000 a year pension boost for a short-term job.)

The Contra Costa retirement board asked a fiduciary counsel, Harvey Leiderman, for a review of its policy on setting the final pay used, along with years of service and retirement age, to determine pension amounts.

Leiderman’s report has been posted on the retirement system web site since October. The board, correctly anticipating a large turnout, moved the hearing Monday (Jan. 11) to a hotel meeting room.

The Leiderman report said some of what the public might regard as “spiking,” manipulating the final pay to boost the pension, is required in the county systems under a 1997 state Supreme Court decision.

In a suit filed by Ventura County deputy sheriffs, the court found that a number of pay items were being improperly excluded from final pay, such as bilingual, uniform, education, meals, leave, holiday, training and longevity bonus pay.

To resolve lawsuits about additional pay items and a pension boost for current retirees, Contra Costa agreed to the “Paulson settlement” in 1999. Then the pension board voluntarily applied the settlement to all members of the retirement system.

Leiderman said the Paulson settlement protects the pensions of persons who retired before Sept. 30, 1997. But pensions after that date are not bound by the court settlement.

Now the problem, Leiderman said, is that the board’s policy on final pay is not consistent with two later court rulings (In Re Retirement and Salus) on when pay is earned and cashed out.

The example used in the report is a San Ramon fire chief, Craig Bowen, who retired at age 51 in December 2008 with a $222,507 base salary and a $283,958 annual pension.

Leiderman said it was proper to boost Bowen’s base salary with management pay $4,906, stand-by pay $11,074 and auto allowance $8,400. He said what appears improper is $9,405 for cashing out administrative leave and $28,121 for vacation time.

“Thus, we can see how just one example of what the press labels ‘pension spiking’ (albeit an extreme case) could result in a benefit cost approaching a million dollars over time,” Leiderman wrote.

Some board members and persons who testified said that public employee pensions are vested rights, protected by a series of court decisions, and cannot be cut unless replaced by something of equal value.

“Is there any time when a retirement board has taken away a vested benefit?” board member Richard Cabral asked Leiderman, “and what would motivate them to do so? Has that ever occurred?”

“The question contains it’s own answer,” Leiderman replied. “Once someone has decided it’s a vested benefit, of course it can’t be taken away. The fight is over whether it’s a vested benefit … You can’t be vested in a mistake.”

Leiderman recommended in his report that the board determine the extent of “overstatement” of final pay, whether employer-employee contributions have been made for the overstatement, and what policy changes are needed to comply with the law.

Repayment worry stems from a recommendation to determine if “it is appropriate to take corrective measures as to current and future retired, active and deferred members of the system, including recalculation of benefits, arrears contributions and other actions.”

The Contra Costa board may face a dilemma as it struggles with a decision about final pay. If the board reduces benefits, active and retired members are expected to sue. If the board does not change benefits, counties and district employers may sue.

“A decision to reduce their (retiree) pensions would be wrong and likely not legal,” John Keel, president of the San Ramon Valley Firefighters Association told the board. “A decision to make a change to active or future employees would also be wrong and likely not legal.”

Leiderman said that when the Fresno County retirement system was using the months with highest pay throughout a career to set pension amounts, the county sued and the pension board was defended by deputy sheriffs.

“I’m not saying it’s right or wrong,” he said. “The question was who would sue, and the answer is the county or the fire districts or somebody who is paying for what they believe is an erroneously increased benefit.”

In the stock market crash, the Contra Costa retirement system had a smaller percentage of losses than many pension funds. But county payments to the pension fund reportedly are expected to increase 77 percent in the next six years, up $105 million.

When a board member asked Leiderman if taxpayers would have legal standing to sue the retirement system, he replied, “I don’t want to discuss that in a public forum.”

Among the speakers at the hearing were Marcia Fritz, president of a group working to put a pension-cutting initiative on the statewide ballot in November, and Kris Hunt of the Contra Costa Taxpayers Association.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Posted 14 Jan 10

4 Responses to “Can errors cut public pensions, force repayments?”

  1. Enough Says:

    Just about all the quotes are from those enjoying these unintended extras.

    Not surprising, anyone presenting the “taxpayer” perspective at such a meeting would be lynched. Don’t believe me ? Try it !

    Well, here’s one taxpayer’s view …..

    Stop it going froward & pay back the excess already paid.

    We, the taxpayers are not YOUR servants (either) !

  2. Nonsense Says:

    “A decision to reduce their (retiree) pensions would be wrong and likely not legal,” John Keel, president of the San Ramon Valley Firefighters Association told the board. “A decision to make a change to active or future employees would also be wrong and likely not legal.”

    Its comments like this that drive taxpayers to want to completely renege on all pensions and benefits.

    The level of greed is just astounding.

  3. BIll Says:

    Where are they going to get the money to fund the ponzi scheme when the majority of the private citizens move out of the state. Good luck with that.

  4. cricut scrapbooking tool Says:

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