July 9, 2012 at 1:00 am

Ficano appointees get big pension payouts

Early retirement deals add stress on Wayne Co.'s troubled fund

Robert Ficano (File photo)

Detroit — Retiring before 50 years old is a dream for most. But it's possible if you work for Wayne County Executive Robert Ficano.

A controversial early-retirement buyout Ficano offered his staff last year was so lucrative that Nancy Olind, a 37-year-old human resources executive, was able to draw a pension after 15 years with the county. She'll make $42,500 a year for the rest of her life.

Her pension is one of several deals for Ficano appointees that critics say is sinking the system for 5,600 retirees. A report last month found it was only 50 percent funded, among the lowest in the nation.

Ficano aides said the buyouts to about 40 appointees last year and a separate 2009 countywide incentive trimmed payroll. But his staffers acknowledged some retirement deals went too far — and even recipients said some make little sense to taxpayers.

"Anybody who could do the math would say, 'Is this realistic?'" asked former Ficano appointee Sue Hamilton-Smith, who retired last year at age 64 to a $70,800 annual pension after about seven years of county service.

"Do I think it was the best deal for Wayne County as a taxpayer? Maybe not. But nobody gave me a Door No. 2."

A review by The News of about a dozen Ficano appointee retirements since 2009 found:

Former personnel director Tim Taylor crafted the buyout plan and may have benefited the most. When he retired last year, he used a lump-sum payout of 24 weeks' pay — an estimated $60,000 — to boost his final pension to $118,000 per year. He was the only county employee to use the perk.

Joan Brophy, an economic development staffer, retired in 2009 at age 48 to a $44,000 annual pension. Shortly after, she was hired back on a contract at $82,500 a year.

A top county attorney and Ficano adviser, William Wolfson, retired at age 50 in 2009 with a $124,000 annual pension after 11 years with the county. He also was rehired on contract — $54,000 last year — and could draw a separate pension from his time with the city of Detroit.

Most county retirees make far less, averaging $22,373 in 2010. Bobby Hawkins, a former sheriff's sergeant, is outraged.

"Retirees who actually put in the time were not treated well and the people I call 'friends and family' are just taking the whole pie and walking away," said Hawkins, who retired in 1984 and has a pension of $16,000 a year.

Ficano staffers blamed investment losses and a so-called 13th check — an annual cost-of-living payout for retirees — for the system's troubles. His administration appoints one of eight members to the pension board and has fought the extra check in court.

The early-out deals cut payroll at a crucial time, saving $2.8 million per year from the 2011 deal alone, Ficano staffers say. And most recipients invested hundreds of thousands of dollars to buy into the system, including Wolfson and Hamilton-Smith, who bought years they worked for other governmental agencies.

But Ficano spokeswoman June West couldn't defend Olind's retirement at 37. "Let's just say if we had to do it over again, we would have an age requirement," West said.

Retiring at age 37

Amid the 2008 stock market meltdown, guaranteed pensions were seen as a vanishing benefit.

They made a comeback in Wayne County.

In late 2008, Ficano opened a new defined benefit plan, Plan 6, to county employees that guaranteed a monthly payout based on years of service and pay.

The county ended a similar plan in 1983 and moved new hires to a 401(k)-style one. A countywide buyout followed in 2009 that let recipients retire after 20 years, instead of 25.

Ficano's staffers have said he decided to reopen the pension as a trade for union health care and wage concessions when the available actuarial studies showed the system was 89 percent funded.

The move shocked Gary Evanko, Ficano's deputy chief financial officer, who had worked for the county for about 16 years. Recipients had to buy into the system — at discounted prices —and Evanko moved quickly, using his county-matched 401(k) cash and borrowing on credit cards and his life insurance policy.

"I never dreamed I would ever see a defined benefit pension. Never, ever," said Evanko, who now collects $83,000 a year.

"I told the wife, 'It doesn't get any better than this.'"

It did.

In 2011, Ficano offered another deal for his appointees. He waived rules that required retirees to be at least 55 and allowed them to buy — at discount — as many as six of 20 years of service.

That's how Olind retired.

She started with the county in 1996 as a juvenile detention specialist and bought another five years and five months to give her the 20 years she required. The exact cost of the years was unavailable, but pension records show her contributions to the system were almost $159,000.

"That's a perversion of the pension system," said Robert Murphy, a former pension board member and Ficano critic. "When you let people buy time, you are putting a load on the system it can't sustain."

At least one expert said he's never heard of someone so young retiring from government.

"That's a record — 37 is just outrageous," said Bill Zettler, a consultant with the Chicago-based group, Taxpayers United of America, which gathers data on public pensions.

Olind, who made $93,000 a year when she left as division director of organizational effectiveness, did not return calls.

West called Olind an "isolated" case and said there are only "a couple" employees younger than 50 who retired. She said future deals will have an age requirement, but argued the offers helped reduce Ficano's stable of appointees by 30 percent since 2008 to 179.

"Retirement incentives are a very common practice in the private sector," West said. "They are a major cost saver."

County retirements in 2009 and 2010, though, added $22.8 million to the system's payouts — more than was added in the previous seven years combined.

Pension board members have questioned the buyouts and hired an attorney to look into them. Board member Hugh MacDonald said he's concerned that letting employees buy time they haven't earned hurts the system — whether it's time earned with other governments or offering years at discounted prices as an incentive to leave.

"It is time that is arbitrarily valued in after the fact situations," he said

Underfunded system

Pension board members last month said the system needs another $800 million to be considered fully funded. That grew by $200 million from last year, when the system was 60 percent funded. Most systems nationwide are about 75 percent funded, according to a national study.

City of Detroit employees can't purchase other government time and the state of Michigan limits its employees to five years. The Wayne County pension board's staff didn't return an email for comment on the policy.

Wolfson bought a little more than 19 years, the bulk of which were from his time with the city of Detroit. That gave him about 30 years of credited service toward his Wayne County pension. He declined comment.

Hamilton-Smith, who was the county's director of program education and advocacy when she left last year, bought about 12 years of her 20 years of credited service. Much of that was also city of Detroit time.

The exact price the two paid wasn't available, but pension board records of the pair's contributions show Wolfson gave the system nearly $600,000 and Hamilton-Smith contributed about $360,000. West said the government time is purchased at "full actuarial rates."

"I had to do a lot to make that happen," said Hamilton-Smith. "If you are not expecting a pension and a way is provided for you to purchase into a pension, it's a blessing. It wasn't free."

But she said she understands how those on the outside may view the deals.

"I would be really mad," Hamilton-Smith said.

Brendan Dunleavy, the county's former auditor general, said buying time isn't as expensive as it seems because the investment can be recouped in just a few years. Many used their county-matched 401(k) funds to buy in to a guaranteed pension.

"What they did was pay too dear a cost to get those folks off the payroll," Dunleavy said of the Ficano administration.

Investment losses blamed

Ficano's spokeswoman blamed failed investments, not the retirement deals, for the system's troubles. Last month, a pension consultant told the board the "majority" of the recent declines were investment losses, nearly $110 million.

"There are more significant issues with the pensions fund than the additional liability from a relatively small number of added retirements," West said.

The board — not Ficano — makes investment decisions. West said the 13th check has cost the system $391 million since 1986 and cited a memo from a pension board consultant in 2010 showing the system would be 90 percent funded without it.

Ficano wasn't the only elected official to extend the buyout deals. Former commission chairman Edward Boike opened the system to commission staff.

He and another 10 of 15 commissioners moved from 401(k)-style plans to the guaranteed pension. Boike, who served 22 years, said he spent about $167,000 to buy in.

"When I see everyone else doing it, the people I respect on the commission deserved it too," said Boike, who retired last year and at 67 draws a $48,000 annual pension. "If they are whining and crying now, (the commission) can change it."

One of Ficano's longtime aides, Nancy Mouradian, makes no apologies for moving from a 401(k) to a defined benefit plan in 2009. But she can't defend the deal her boss made two years later. "Some of the more recent opportunities are very lucrative," said Mouradian, a 22-year employee who draws a $79,400 annual pension. "It worries me that the county is in what appears to be dire financial shape."

She said pensions "may go the way of extinction."

"It's a sign of the times," she said. "But I think I earned it."

cmacdonald@detnews.com

(313) 222-2396

Mike Wilkinson contributed to this report.