Pension goof costs $11 million
County retirees get back payments
Holiday gifts of cash arrived early for nearly 1,300 retired Milwaukee County employees who finally received what they were owed in back pension payments, county officials said Thursday.
The group of 1,283 retirees received a total of $11 million on Nov. 16, an average of $8,573, to make up for underpayments that started 15 years ago.
From 2001 to 2008, the county’s retirement plan services office used the wrong mortality table to calculate pension payments to this group, according to reports to be presented Friday to the County Board’s personnel committee.
Supervisors were informed of the mistake after it was disstatement covered in 2007 and have been given updates on attempts to resolve the problem since that time, according to Raisa Koltun, chief of staff to County Executive Chris Abele.
U.S. Internal Revenue Service rules require pension plans to pay 8% interest on such underpayments. Consequently, this group of retirees received a total of $11 million, including interest, in one-time lump sum retroactive payments on Nov. 16, county retirement plan services director Marian Ninneman said Thursday. She was not director of the office before 2008.
Monthly payments also have been adjusted for the group. Average monthly payments were $2,222 before the correction. Adjusted monthly payments will average $2,262 for those retirees, a report to the board said.
Ninneman estimates the county will pay out an additional $6 million to those retirees over their projected life expectancies as a result of the adjustment in monthly benefits.
On Thursday, County Board Chairman Theodore Lipscomb Sr. criticized Abele for not making the payments earlier to avoid some of the interest costs.
“The amount the county owed grew every year by 8%, saddling us with dramatically larger costs than what we would have paid if the problem had been corrected sooner,” Lipscomb said in a statement.
Lipscomb is asking Comptroller Scott Manske for an analysis of interest costs that have accumulated over the years.
The lump-sum payments could not have been made, as well as adjustments to the monthly benefits for the group, until the IRS approved the county’s plan to make the retirees whole, Ninneman and Chief Human Resources Officer Kerry Mitchell said in Nov. 11 correspondence to Lipscomb.
The IRS issued its compliance in June, they said. Lipscomb was provided a copy of the IRS statement on June 30, board meeting records show.
The county increased contributions to the pension fund by $20 million for 2016 to correct for previous actuarial errors and a Pension Board decision to shorten the period for fully funding the county’s pension liability from 30 years to 20 years.
This group of retroactive and corrected monthly payments will reduce pension fund assets while increasing the amount of unfunded pension liabilities in the future.
Consequently, the county will need to increase contributions to the pension fund by more than $1.5 million a year over 20 years to make up for the miscalculations, according to Larry Langer, principal and consulting actuary for Buck Consultants LLC of Chicago. The company is the county Pension Board’s actuarial consultant.