Retirees sue Hamden over budget cuts

HAMDEN — The town and its retirement board are being sued over a July decision to reduce benefits for hundreds of retirees.

The cuts were based on the claim that Hamden for years had paid higher cost of living adjustments than the retirement plan dictated. The town has also has considered further cuts to recoup millions of dollars of alleged overpayments, though Mayor Curt Leng said the Hamden Employees Retirement Board has not made a decision on the matter.

Some 200 retirees, including former firefighters, police officers and other municipal employees, came together as the Hamden Guardian Services Retirees Association to fight the town’s action, according to their attorney, William Ward.

Their lawsuit was filed in New Haven Superior Court in November but transferred to Connecticut federal district court the following month, according to online judicial databases.

The complaint demands the town and retirement board eliminate the prior reductions and be prohibited from making future cuts. It also asks for monetary damages and attorney fees.

Ward said his clients planned their financial futures, purchased homes and took out mortgages, based on their benefits.

It “seems dramatically wrong to me, frankly,” Ward said. “To go after these people is, frankly, disgusting. I mean, they use this for medication, they use this for food.”

A memorandum from Segal, a consulting group the town hired to investigate payments to retirees, lays out why the town opted to reduce benefits.

The town’s retirement plan offers COLAs of up to 3 percent each year but is dependent on inflation, according to the report, which was attached to the agenda of a July retirement board meeting. (At that meeting, the board unanimously approved the reduction in benefits, according to the recorded minutes .)

For years, the town gave retirees the maximum 3 percent COLA, even though since 1993 inflation often has fallen below that number, the report says.

Meanwhile, Hamden also underfunded its pension fund for decades, leaving it only 10 percent funded in 2014, when the town took out a $125 million pension obligation bond to bring the fund to 37.5 percent.

The town stopped giving 3 percent COLAs in 2013, according to the Segal memorandum. That was after then-Mayor Scott Jackson recognized the error, the New Haven Independent reported.

The lawsuit alleges Hamden misrepresented the COLAs and that the retirees had no reason to believe anything was wrong with the payments.

Ward said many of his clients received letters from the town confirming an annual 3 percent increase. He shared a copy of one such letter, signed by Personnel Director Kenneth Kelley in 2012, with the New Haven Register.

But the mayor indicated benefit levels were above what they should have been under the retirement plan. Since Hamden has a pension trust, the retirement board had “a legal responsibility” to correct the error, Leng said.

“What we had to do, both really legally and also it was the right thing to do for the health of the plan, was to make sure that people were getting paid what they had earned in their contracts, every penny of it, but to make sure that it was being done the right way,” he said. “We looked very carefully at how much impact it would have on people, because many of us on the pension board were extremely concerned about how this might affect some of our seniors on fixed incomes whom no one wants to hurt.”

The lawsuit, on the other hand, argues that by reducing benefits, the town breached its “fiduciary duty” to the retirees.

The board “had an obligation to act in the best interest of the retirees,” Ward said.

Benefit cuts have ranged from less than one percent to 11 percent, and affected more than 600 recipients, including spouses, according to the Segal report.

The reduction saves the town’s pension some $9 million in long-term liability, Leng said. It also reduces the town’s actuarially required contribution to its pension fund by some $640,000, per the Segal report.

Leng said Segal performed extensive, detailed calculations “down to the penny.”

But Ward claimed his clients did not receive information on how the reductions were determined. While he has asked the town for the calculations, it has not yet provided them, he said.

“I don’t know if I believe” them, he said. “I wanna see the individual calculations.”

More could be a stake for the retirees. While Hamden has not yet approved such a move, the Segal report looks at ways to recoup past overpayments — with 4 percent interest.

The report estimates that for those still being paid, Hamden made about $12.3 million worth of overpayments. Four percent interest brings the number to $16.5 million, it says.

The lawsuit, filed in New Haven Superior Court in November, anticipates such an action.

A judge denied a request from Hamden to dismiss the case late last month, according to an online federal judicial database.

“I can’t comment in detail on pending litigation but we do have our pension board attorney and others looking at the matter for the town,” Leng said.