An ongoing overpayment to one pensioner from the Milwaukee County Retirement System that amounted to $140,000 over several years has cost the head of that system her job and ignited calls for the city pension system to be turned over to the state for new management.
The mistake has forced the system’s head,, county retirement plan services director Marian Ninneman, to resign. The story, reported in the Milwaukee Journal Sentinel, said Ninneman was informed of the mistake about three years ago, but apparently failed to take corrective actions.
The newspaper reported that when Ninneman was informed about the overpayment to an individual in April 2014, it already had been going on for more than a year, county risk management director Amy Pechacek said. Pechacek found the mistake and reminded Ninneman of the error in May 2016, but again the director took no corrective action, she said. Since Ninneman’s resignation, Pechacek has been named interim director of the pension fund.
Meanwhile, the recipient of the overpayments, the spouse of a deceased county employee, was notified about the mistake and been asked to repay the county. If that fails, the county is considering cutting future beneficiary payments to the spouse in an effort to recover the money.
The system issues 8,150 checks monthly and an outside auditing firm, Baker Tilley, has been hired to work with the county comptroller to gauge the extent of payment errors, according to County Executive Chris Abele.
More Bad News for Milwaukee
This is the second large mistake for the Milwaukee system. Three months ago, the county had to pay out $11 million to compensate for pension underpayments to nearly 1,300 county retirees that started 15 years ago.
Those mistakes, made between 2001 to 2008, occurred after county pension office workers used the wrong mortality table to calculate payments. At that time, Ninneman was not the fund’s director. She became director in January 2011, a few months prior to Abele’s election as executive in April 2011.
Earlier, the Milwaukee system had to make an additional $20 million contribution to the pension fund in 2016 to correct for previous actuarial errors and a Pension Board decision to shorten the period for fully funding the county’s pension liability from 30 years to 20 years.
Also, earlier this year a report said four retirees received lump-sum checks exceeding $1 million in addition to regularly monthly pensions because so-called “backdrop payments” were paid.
Backdrop payments are bonuses paid to workers who continue to work past their retirement date. Milwaukee County has paid out more than $294 million in backdrop bonuses to retirees since 2001.
In 2015, the fund also made the news when its actuary miscalculated the 2015 contribution which was $38.3 million less than it should have been. The actuarial consultant, Buck Consultants, LLC in Chicago, did not include a cost-of-living adjustment paid to retirees each year in the plan’s overall funding requirements, according to reports.
County Supervisor Sheldon Wasserman, vice chair of the board’s Finance Committee, is pushing to merge the county pension into the state system. Currently, the Milwaukee system is the only county in Wisconsin with its own pension system. Wasserman said he is drafting a resolution to turn Milwaukee County’s independent pension system over to the state. “The county has to get out of the pension business,” Wasserman said in a Journal Sentinel article.
The Wisconsin Department of Employee Trust Funds administers retirement, insurance and other benefits for state and local government employees.
The Milwaukee County Retirement System paid out over $212.5 million in monthly pension benefits in 2016, records show. As of Dec. 31, 2016, the market value of the county pension fund was more than $1.66 billion.
When asked about the resignation, Milwaukee County Executive Chris Abele said: “While the system is currently sustainable and retirees can feel secure about the promise of their earned benefits, I want to take steps to ensure that future employees and retirees have that same security. I also want the taxpayers to feel confident that their dollars are being managed wisely.”
Milwaukee County’s Risk Management Director, Amy Pechacek, who is also serving as interim director of the retirement system, added, “The pension system is complex as there are literally hundreds of different benefit calculations. While substantial improvements to our system have been made over the past recent years, we need to continue to increase standardization and auditability of procedures, as well as transparency. We will work with independent auditors to correct this particular overpayment and to identify areas for process and systems improvements. We will also perform stress-testing on the system as a whole to prevent future errors as much as possible by employing best-in-class practices.”
By Chuck Epstein