City wants pension overpayments returned

About 1,400 retired Minneapolis police and firefighters learned Monday that they could face huge IOUs to the city if it prevails in a lawsuit against their pension funds.

For the first time, the city made it clear that it wants a judge to order two closed pension funds to retrieve $52 million in alleged overpayments to retired police and firefighter pensioners or their survivors.

That would amount to an average of nearly $42,000 for each retired police pensioner or survivor and more than $30,000 from each firefighter retiree or survivor.

"It kind of takes my breath away," said Arthur Maxwell, a 72-year-old retired police inspector.

"I can't imagine that."

His former patrol partner, Park Commissioner Walt Dziedzic, 76, added, "I'd have to go on food stamps, I suppose."

The city claims that the pension funds overcharged the city for benefits, according to attorney John Lefevre, representing the city in a trial that began Monday. Recovering the money would mean that the city would pay less for pensions in the future.

But attorney Robert Klausner, representing the pension funds, told Hennepin County District Judge Janet Poston that she lacks the authority to order the funds to collect the money from past payments, and that individual pensioners should be a party to the suit if that is what the city wants. Poston previously rejected the argument that pensioners should be parties to the suit.

Dwindling memberships

Klausner also said that the city's request poses practical difficulties in recovering benefits paid to now-deceased pensioners. He said the funds, which have a combined membership of about 1,400 members, lose 30 to 40 members annually to death. Recovering the money likely would require that a receiver be appointed, Lefevre said.

If the city should prevail on the method of calculating benefits, checks for firefighters would be cut by about 7 percent and a police pension would drop by about 14 percent, Johnston said in an interview. According to pension fund documents, the average police pension was $47,467 in 2008, with survivors drawing an average of $26,818 annually. The average retired firefighter drew a pension of $43,553; firefighter survivors drew an average of $24,150.

But because the city also is seeking refunds of past payments back to 2003, the potential losses to retirees could be much more severe.

Another police retiree, former Minneapolis Mayor Charles Stenvig, 81, said he thinks the city's position is wrong. "We negotiated all those things," he said.

Asked about the city's chances of collecting, he and Dziedzic both responded the same way: "Lots of luck."

"These retirees are living from hand to mouth to start with, and they don't owe anything," Stenvig said.

No new members

At issue are pensions paid through two funds that haven't admitted new members since the mid-1980s, when new hires began joining a statewide police and firefighter pension fund. The city's contributions to the two funds have been rising, as the number of active firefighters and police paying into them dwindles and more people draw benefits.

The city claims that the pension funds have been improperly including certain benefits in the calculations of the salary bases for the two funds, and in excess of how much money the city actually pays in those benefits.

The funds argue that they have been calculating benefits consistently, and that the city has been tardy in registering its objections.

Both funds are unusual in that they tie pensions not to how much an individual police officer or firefighter earned, but to the salary and some benefits of a top-grade officer or firefighter. That means that pensions of everyone from a career officer or firefighter to the chiefs get pensions based on the same salary.