Pontiac pensioners to be asked to pay back overpayments

Mike Martindale
The Detroit News

Pontiac — While retirees in other cities have seen pension benefits chipped away, city officials say the pension board in Pontiac has generously overpaid some of its retirees.

They want the money back.

At issue is about $659,000 in overpayments made to 600 retirees — about $1,098 per retiree — sent out over the past year to about half of those under the city's General Employees Retirement System. The overpayments have been blamed on a "miscalculation" of tacking a cost of living adjustment onto retiree checks after a special $400 monthly increase was put in place to help retirees retain health benefits.

The city's former emergency financial manager, Louis Schimmel, said that though the initial $400 hike for health benefits was appropriate, cost of living should never have been applied. And while there is $500 million in the 150 percent funded pension coffers to cover the overpayments, Schimmel said, it still needs to be repaid.

"From day one I attempted to have that fund transferred to (Municipal Employees Retirement System of Michigan), but failed," Schimmel said. "This is another example of mismanagement by an 11-member board that really has no expertise in financial management. They are more interested in being a travel club, going around the country to conventions.

"They should be put out of business and the pension fund sent up to Lansing."

The Municipal Employees Retirement System of Michigan, commonly called MERS, is a nonprofit, private company run by an independent, elected board. Efforts to reach several of the board members Friday were unsuccessful.

The mayor, council and employee groups appoint members to the 11-person board. Several are retirees who received overpayments.

"This miscalculation is troubling especially for our retirees who did nothing wrong and are concerned about their future pensions," said Mayor Deirdre Waterman, who has sat on the pension board for a little over a year.

"We are sending out letters this week to all those affected, notifying them that they received money that must be returned," she said. "The pension fund itself is very healthy — one of only a couple in the state which is actually overfunded, I'm told."

Waterman said the overpayments, which began in the final four months of 2013 and throughout 2014, were discovered when the city's finance director, Nervus Nazarko, also a board member, raised questions about the cost of living payments.

Waterman said it will have to be determined how routine audits did not detect the discrepancy and also how investments may have been affected by the money not being available to invest.

Waterman declined to discuss mediation between the city and some of its investment groups or some future considerations on how funds might be handled differently.


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