Three appeals court judges sharply questioned the city of Minneapolis' argument that police and fire pension funds didn't follow proper procedures in calculating pensions, resulting in millions of dollars in overpayments.
The action came Wednesday as the judges heard the two funds' appeal of a lower-court decision. A ruling is due within 90 days.
The case has implications in the tens of millions of dollars for Minneapolis taxpayers who fund retiree checks, and for about 1,400 people who collect them through pension funds that have been closed to new members since 1980. The 1,400 include retirees or surviving spouses.
The police pensioners lost 10 percent of their monthly checks and fire pensioners lost 4 percent under a 2009 ruling by Hennepin County District Judge Janet Poston. The city estimates that her ruling would save taxpayers $87 million in future payments by the time the last pensioner dies. Poston also ruled that the two pension plans must recoup past overpayments to members, which the city figures would restore at least $52.6 million to the funds' balances.
Retirees in the group average about 70 years of age while surviving spouses average 78. They get a benefit that rises with the salary paid to current top-grade patrol officers or firefighters. At issue is whether certain items of compensation beyond base pay were correctly included in the definition of what is salary, and whether others were correctly calculated.
Attorney John M. Lefevre Jr. argued for the city that Poston's ruling should be sustained -- that state law requires an amendment to pension plan bylaws when new elements are added to the definition of salary on which pensions are based. The judges peppered him with questions on that contention.
Charles Lundberg, representing the pension funds, said the 1995 settlement of a previous lawsuit allows salary items gained in future contract talks to be added without an amendment if they meet certain criteria.
Lundberg also said that Poston erred in ruling that the funds must recoup the overpayments back to 2000. He said state law already gives the city a remedy of having overpayments credited against future pension obligations. Moreover, the funds say, because pension fund members weren't parties to the 2006 city lawsuit that launched the case, it's not fair to collect from them.
