Milwaukee County approves deal on recouping $1.5M in pension overpayments to nearly 200 retirees
Nearly 200 Milwaukee County retirees will be on the hook for a total of $1.55 million in pension overpayments under a plan approved Thursday by the Milwaukee County Board.
The deal to recover the overpayments, which were given erroneously to 185 retirees, is part of a package of changes aimed at fixing errors in the county's problem-plagued pension system.
Before the vote, Supervisor James Schmitt, chairman of the board's finance committee, stressed the urgency of addressing the overpayments.
"I ask that you please stop the bleeding," he said.
Schmitt said nobody was trying to "blame the retirees" for the administrative errors, but added that he wants to be fair to current county employees as well as taxpayers.
The proposal passed 10-6, over the objections of Supervisor John Weishan Jr. and others.
'No fault of their own'
Weishan said that some county officials had decided to "demand that the retirees be held accountable for the mistakes made by the administration."
"It was no fault of their own, yet we are demanding that they're the ones that pay the price here and shoulder the burden," he said. "They're repaying for Chris Abele's mistake."
Weishan said money should instead be taken from the county's pension stabilization fund to cover the errors.
Under an amendment from County Board Chairman Theodore Lipscomb Sr. and Weishan, which was approved last week by the finance committee, the county will forgive accumulated interest charges on each of the overpayments if the retiree agrees to repay the principal.
That's a change from an earlier proposal by County Executive Chris Abele and Schmitt, who suggested forgiving accumulated interest charges only if a retiree agreed to repay the principal within 12 months.
County officials hope the interest agreement will serve as an incentive, as interest charges amount to nearly $569,000 at an annual rate of 5 percent, according to the comptroller's office.
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The board has been debating what to do about the overpayments for months.
The board's finance committee last week narrowly recommended approval of the plan.
At that meeting, Supervisor Supreme Moore Omokunde described the nervousness officials have when dealing with the county pension system, saying "the hair stands up" on the backs of people's necks any time the issue is raised.
Pension scandal still echoes
That's in large part due to Milwaukee's pension scandal, which broke more than 15 years ago, forcing politicians from office and saddling taxpayers with massive unexpected costs.
Further delay in repaying the $1.55 million in overpayments to the pension fund would increase the county's already swelling unfunded pension liability, officials warned.
Auditors and pension office staff had confirmed 229 overpayments but 41 of them were dropped from the proposed repayment plan because the individual was deceased or a person's overpayment was below the minimum dollar amount — $165 of principal and interest — deemed worth the cost of pursuing.
Of the remaining 188, another three were removed from the plan after lawsuits resolved disputes, officials said.
The majority of the 185 overpayments have gone to retirees or beneficiaries who are not facing massive new debts, officials said. There are 93 overpayments less than $500, 58 less than $5,000 and another 14 under $10,000.
That leaves 17 overpayments ranging from $10,000 to $100,000, and another three overpayments of more than $100,000
Under the plan, each of the 185 retirees would receive a notice summarizing the error, the correct monthly pension payment and total dollar amount of principal and interest owed to the county.
The notices also would describe repayment options. Retirees refusing to accept the county's offer would be told they are responsible for repaying both principal and interest due.
The proposal also creates a six-year claim period for any future overpayments made in error to retirees. If the Retirement Plan Services office does not find the mistake within six years, then the county becomes responsible for repaying the pension fund for the full amount of the overpayment.
Future overpayments also would be subject to the $165 minimum provision. Retirees would not be asked to repay less than that amount.
The six who voted against the pension measure were Supervisors Willie Johnson Jr., Felesia Martin, Marcelia Nicholson, Steve Shea, Sequanna Taylor and Weishan.
The county's unfunded liability for the pension commitments it already has made to retirees and current employees has grown to at least $550 million, according to county officials.
The county's annual pension contribution — a total of the year's general pension system operating costs and an amount for the unfunded liability — has steadily increased in recent years from $27.4 million in 2012 to $72.6 million in 2018.
The portion of the annual contribution designated for the unfunded liability alone has grown from $10.23 million in 2012 to $53.23 million in 2018.
The county's pension problems grew worse Tuesday when the Wisconsin Supreme Court delivered a victory to a group of Milwaukee County employees, allowing them to take advantage of early retirement benefits that county officials say they didn't mean to give them.
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The 5-2 decision is expected to worsen the county's long-term pension liability.
In other action, the board approved a resolution declaring support for restoring access to driver's licenses for immigrants living in Wisconsin who are in the country illegally. That's a proposal called for by Gov. Tony Evers.
The board also adopted a long-term lease with the Urban Ecology Center for parts of Washington Park.
Do you think county retirees should be required to repay overpayments? Contact Mary Spicuzza at (414) 224-2324 or mary.spicuzza@jrn.com. Follow her on Twitter at @MSpicuzzaMJS or Facebook at https://www.facebook.com/mary.spicuzza.