Minneapolis pension merger nets disputed payouts

  • Article by: STEVE BRANDT , Star Tribune
  • Updated: November 9, 2011 - 10:58 AM

City police and fire pension boards will pay severance to four employees.

The four employees of the soon-to-be-defunct Minneapolis police and fire pension funds will leave their jobs with at least $400,000 in severance benefits, although all four have preference for jobs with a statewide pension plan that's absorbing their organizations.

Board members of the police fund said Tuesday they had to pay the severance under contracts signed years ago, but LeaAnn Stagg, a city representative to the board, said she was "completely aghast" at the deals. She cast the lone vote Tuesday against nearly $211,000 in severance for two employees of that board. Fire board members several months ago approved $185,000 in cash severance for their two employees, plus benefits worth an undisclosed amount.

The two closed funds have been repeatedly criticized by Mayor R.T. Rybak and other city officials for driving up property taxes and running administrative bills several times the amount of those of statewide pensions. For their part, the funds have said their administration costs more because they battled with the city in court.

With the two funds in deep financial trouble and the city on the hook for making up deficits, the Legislature approved a rescue plan this summer that merges the two local pensions plans with the state plan at year's end. The deal boosts pensions sharply for those involved but saves the city millions by lowering its payments and giving it more time to meet those obligations.

The law that authorized that merger also gave the four people working for the soon-to-be-defunct funds preference for openings at the state fund. Council Member Betsy Hodges said that provision makes the severance deals "puzzling."

The biggest salary settlement goes to Minneapolis Firefighters' Relief Association executive secretary Wally Schirmer, a retired firefighter already drawing a city pension of more than $41,000 annually. He was granted about $116,500, or one year's salary. His assistant, Kathy Morkrid, gets the same deal at $70,000. Both also get continued health insurance and cashouts of their unused sick and vacation time.

When asked how much the entire deal was worth, Schirmer said: "God, I don't know. I haven't figured it out."

At the Minneapolis Police Relief Association, the board Tuesday approved a $148,528 severance package for executive director Renee Tessier. That includes a year's salary of $98,345, plus insurance coverage and more than $41,000 in unused time. Accountant Sharyn North gets a $62,400 package. The maximum severance payable to a top-grade police officer is almost $52,000 in sick and vacation leave.

Police board members said they were obligated to pay those amounts under employment agreements they negotiated with their employees several years ago. "We don't change ballgames in the middle of a contract," board secretary and retired police officer Jack O'Keefe said. One city representative, Rebecca Law, said the amounts "are hard to swallow" but she felt obligated to honor the contract. Not so for Stagg. "I have a major issue with this," she said.

Board member Mike Sauro, a Minneapolis police lieutenant, said that with merger talks dating back to 2008, the board wanted a severance deal to keep Tessier on board so she didn't take another job. Tessier has worked for the board for 25 years, and North for 16. Tessier said her predecessors also had severance deals because the Legislature could merge the fund any session.

"We would like to be at our same jobs for the next 10 years, but we didn't get a vote," Tessier said in an e-mail. She and Schirmer said none of the four has been offered a job by the state fund.

The fire severance deals for Schirmer and Morkrid weren't developed until June, a month before the merger deal was approved by the Legislature. June meeting minutes show that Stagg left the meeting before the matter arose, but they do not record how the other city representative, Jack Qvale, voted. He didn't return a call Tuesday.

The city and police board are negotiating over settling a lawsuit between them over the proper compensation on which to base pensions. Pension representatives want the city to drop its claim to recoup amounts that a judge ruled were overpaid to police retirees.

Police board members said at their meeting that they're worried the city will try to force a resolution of that issue on its terms as it nears the Dec. 30 merger deadline. Later this month, the board is to discuss a proposal by Sauro that would withhold $10 million from the merger and put it in a trust fund to pay any recoupment and associated lawyer bills. The police fund now has about $285 million in pension assets.

Steve Brandt • 612-673-4438

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