County retirees would not pay interest on pension overpayments

County would pay back $2.5M to make fund whole

Milwaukee County officials on Friday proposed a compromise on collecting $1.85 million worth of pension overpayments made by mistake to 262 retirees in recent years.

The county would repay the $1.85 million, plus $650,000 in interest, to the pension fund to make it whole and to halt the accumulation of further interest costs to the county, as part of the plan.

The core of the compromise is a proposal to relieve retirees of paying interest to the county on overpayments they have received, County Corporation Counsel Margaret Daun said at a special meeting of the County Board’s finance committee.

In return, the county will require those retirees to accept a corrected monthly payment amount and agree to a repayment plan, Daun said.

Errors in calculating benefit payments for the retirees were made by county employees, so collecting interest on overpayments from those retirees would be “punitive,” Daun said.

“We made that error so we’ll pay the interest,” she said. The county’s offer to cover interest costs should be a financial incentive for retirees to accept repayment plans, according to Daun.

One other piece of this plan would prohibit the county from collecting overpayments that were made more than six years before approval of the plan.

Supervisor James Schmitt, finance committee chairman, said the proposal is a compromise between county government’s responsibility to its taxpayers and the belief of several board members, particularly Supervisor John Weishan Jr., that the county should forgive the entire amount of overpayments.

“We seem to be blaming retirees” for the mistakes, Weishan said in describing the compromise. “It’s 100% our mistake. We need to forgive.”

“We have a responsibility to taxpayers as well,” Schmitt said in response to Weishan’s comments. If the county does not put the plan in place later this year, and repay the pension fund the total of $2.5 million in overpayments and interest due, the total liability will keep growing, Schmitt warned.

“We need to do this as soon as we can,” he said.

Schmitt will introduce the proposed ordinance in September for review by the finance committee and he expects the County Board will act on the policy at its October meeting.

The proposal comes just a few days after a county pension reform task force recommended the possible elimination of 2% annual cost-of-living increases now added to pension payments of thousands of retirees.

The automatic increases cost the county up to $20 million a year, officials said.

The savings could pay the $10 million to $15 million cost of moving future employees and those recently hired out of the county’s troubled and error-prone pension system to the Wisconsin Retirement System.