nothin Retirees Organize To Save COLAs | New Haven Independent

Retirees Organize To Save COLAs

Sam Gurwitt Photo

Pension board attorney Marc Wallman.

Three weeks after Hamden’s retirement board heard a presentation from its actuary outlining its options for recouping $12 million in historical overpayments to pensioners, some of those retirees are banding together to protect their pensions.

In June, the Hamden Employees Retirement Board received a long-awaited report from Segal Consulting on past overpayments the town made to pensioners through their cost of living adjustments (COLAs)

In total, the report showed, the town had overpaid its pensioners $12 million over the course of the late 20th and early 21st centuries. It outlined a few options for recouping those overpayments, all of which would involve reducing the monthly benefits pensioners receive, many of whom have no other source of income.

On Monday, the Hamden Guardian Services Retirees Association retained attorney Bill Ward to represent a growing group of retirees against the town. Ward, who has only begun to formulate a case, said there are a few options for fighting the town’s attempt to recoup overpayments.

Association President Bob Maturo said he’s still contacting retirees to see who would be interested in joining the case. He said he’s reaching out to both association members and non-members, who don’t have any organization that could represent them.

At issue are COLA overpayments the town made mostly starting in the 1990s and ending in 2013. The town’s pension plan says that retirees’ COLAs are supposed to match the consumer price index (CPI) — one measure of inflation — up to 3 percent. That is, in a year when the CPI is below 3 percent, pensioners get a COLA equal to the CPI. In years when the CPI is above 3 percent, they got a 3 percent COLA.

Instead of following the plan language, the town simply gave 3 percent COLAs across the board, even after the CPI dipped well below 3 percent in the 1990s. This was partly due to a bank” system. The bank” allowed retirees to essentially defer payments they would receive in high-CPI years but couldn’t because of the 3 percent cap, and receive them in low-CPI years. In years when the CPI was above 3 percent, pensioners got 3 percent COLAs, and the difference between the CPI and the 3 percent COLA was carried forward in a bank,” and could be applied to COLAs in years when the CPI was below 3 percent to keep COLAs at 3 percent. That bank system in itself was not a mistake. The pension plan’s establishing ordinance includes language allowing the practice.

But in some cases, the town seems to have kept paying 3 percent COLAs even when people’s banks were depleted. And it also did the calculations wrong.

COLAs, according to plan rules, were supposed to be calculated each year, and were supposed to compare the current year’s CPI with the CPI in the year of retirement. That is, if a retiree retired in 1990, in 2000, the town was supposed to give the retiree a COLA that would bring their pension even with the CPI growth between 1990 and 2000.

Instead, the town simply applied COLAs on top of the previous year’s benefit amount. That meant that overpayments compounded.

Lowering pension benefits and recouping overpayments could save the town tens of millions of dollars over the next few decades — welcome budgetary relief for a town that is dangerously close to fiscal insolvency. Hamden’s pension, which has been underfunded for decades and now saddles the town with about $300 million of unfunded liabilities, has been one of the key drivers of the town’s financial distress.

But recoupment would also mean reducing the benefits of hundreds of retirees and the widows of retirees, many of whom have no other source of income and are too old to get a job to help pay the bills.

This is not the fault of the retirees. It’s their fault,” said Ward, referring to the town. They need to fix it. And there’s other ways to fix it than attacking people on a fixed income.”

It was not the retirees who made the mistake, Ward said. The town messed up, and it’s unfair to make retirees pay for it.

A reduction to pension benefits could mean a significant hit to retirees, said Maturo. Many, like retired police and fire fighters, don’t get social security.

I think it would adversely affect a lot of retirees who just don’t have the ability to supplement that loss of income,” he said.

Board attorney Marc Wallman has frequently told the board that it is both able, and obligated, to recoup past overpayments because it has a fiduciary responsibility to administer the plan correctly. If there was a mistake, it’s the board’s responsibility to fix it, he has said.

Ward, on the other hand, argued that while it is the town’s responsibility to administer the plan correctly, the burden should fall on the shoulders of the town, and not its retirees, when something goes wrong. As he put it in a press release sent to the Independent Tuesday, the town does not allege that these employees engaged in any wrongdoing. In fact, Hamden admits that any culpability for underfunding its pension is entirely its own fault. Hamden’s solution to this self-created problem, however, is to target its own retirees rather than place responsibility where it properly belongs, namely with the plan fiduciary or other entity whose negligence lead to the miscalculation.”

His release said the plan should recover funds from the town, or from the party that breached its fiduciary responsibility. Whoever was responsible might have insurance to pay for it, he said.

He also questioned whether the overpayments really were a mistake. He pointed to the minutes of two meetings from 2002. The transcript of one meeting shows board members discussing the three percent COLA, though the context is not entirely clear.

Board member Patricia Riccitelli member is recorded saying that the town and unions had negotiated, and had agreed to leave the COLAs at 3 percent. It appears, based on the context, that she was referring to cases where pensioners did not have anything left in their bank,” or had not yet built up a bank.”

We agreed that we would keep it because that was the practice and it would never go below three percent,” she is quoted saying. The minutes of a later meeting show her introducing a motion to keep all current retirees at a 3 percent COLA. The motion passed.

Ward said those minutes show that the board knew about the 3‑percent-across-the-board COLAs as early as 2002, and that overpayments may not have been made in error, as the town claims. When the board voted then to keep COLAs at 3 percent, it conformed the plan to its operation,” he said. That would mean the town could not claim it had made a mistake and could not get those overpayments back.

But those minutes do not necessarily show that the board knew about all of the errors with its pension administration. For instance, they do not show that board members were aware of the fact that COLAs were being applied on top of the previous year’s benefits, instead of being recalculated each year back to the year of retirement.

When a board member brought up those minutes at last month’s meeting, Wallman said they don’t complicate the picture because the board does not have the power to change the terms of the plan. The plan is established by ordinance by the mayor and Legislative Council.

The plan is the plan,” he told the Independent. The board can’t amend the plan. The only people who can change the terms are the town” — that is, the council.

Ward said there he might also argue that the town would run into statute of limitations problems in trying to recoup the overpayments. If the board knew about the overpayments in 2002, and the problem has been going on for so long, it might be too late for it to act.

The pension board will meet again Friday over the Zoom teleconferencing app, when it is scheduled to continue discussing the COLA report.

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