Westport finance director's role in New Canaan pension flap questioned
The two New Canaan municipal officials most involved with excess pension payments to a former first selectman made it clear last week that they were acting under the direction of then-Chief Financial Officer Gary Conrad, who earlier this year was hired as Westport's finance director.
Pension Administrator Diane Wilson and Director of Human Resources Cheryl Pickering-Jones each said that they did not believe Conrad intentionally circumvented protocol by paying former New Canaan First Selectman Jeb Walker under a new calculation without the approval of town bodies, but that in the confusion of the time, that is what happened.
"Diane was instructed to calculate (the pension) at four years," Pickering-Jones said. "It was service, it wasn't necessarily vested service." According to Wilson and Pickering-Jones, the pension rate for four fully-vested years is $944 per month. At the time of his retirement, Walker only had one year and seven months vested out of his four years of service. The rate for this amount of service would be $373 per month. Since December 2011, when Walker retired, the difference between these rates amounts to $5,140. Under the town's pension plan, it is not until five years of service that an employee's pension vests.
Wilson recalled that she double-checked with Conrad whether she should calculate the pension with four fully-vested years, and that he instructed her to do that.
Conrad did not return calls for comment.
The former Republican first selectman announced last week that he is willing to repay to New Canaan the excess pension money he has received, according to a letter from him to town officials.
Walker requested to be paid the partially vested rate of $373 per month into a town account, "until the entire $5,140.00 overpaid to me during the period December 2011 through August 2012 is recouped." When all the money has been recouped, he asks to have the correct rate of $373 resume.
Some have raised the issue of whether he should pay back the money all at once, as opposed to monthly installments.
"I just chose to do that ... If the town wants me to do it differently, I'll do it that way," Walker said.
According to Pickering-Jones, he will have to pay it back in one sum.
"By IRS rules, we're not able to keep a person's pension. He will receive his $373 per month, but he will have to make the total amount back to the town." Walker said he was unaware that the pension should have vested after five years.
"Frankly, I didn't pay any attention to the pension plan as it affected me. I was surprised to be getting a pension at all," he said.
Walker also said he did not discuss the terms of the pension with anyone before he left. He said he was given forms that listed his pension at $944 per month, and he filled them out, and that was the end of it.
"There was no conversation," Walker said. "Nobody seems to understand, I walked in and signed the papers and walked out. When (current New Canaan First Selectman Rob) Mallozzi was sworn in, I went out the back door."
Wilson said the change from a five-year vesting period to a four-year one had been suggested since 2007 and in the works since the spring of 2011, complicated at various stages by an abrupt withdrawal of the town's actuarial firm, Mercer, by electing a new first selectman, and by Conrad's departure.
"In the spring of 2011, we started talking to our actuary about an amendment. ... The steps weren't entirely clear as to who had to approve it," Wilson said. "It was unclear to the CFO as to if this amendment existed what would have been the process, or do we just create this amendment and go through with it. Mercer told us last summer they were exiting the business. ... from August until we hired Hooker and Holcombe in January, we didn't have an actuary," Wilson said.
She said at the time, Conrad was focused mainly on getting an actuarial evaluation from Mercer as they were leaving, and that it was during this period that he instructed her that the move to a four-year vesting period had been in the works for some time, and that she should calculate Walker's pension as fully vested.
The confusion continued, not only about who was paying whom, but also regarding how people were getting paid. While the pension fund contained assets more than 125 percent of its financial liabilities, the excess money was used to help fund health care costs for retirees of the town, under Section 401(h) of the Internal Revenue Code. As a result, workers who contributed to the fund were vested for each year and each month the fund also contributed to health care.
The fund was above 125 percent of liabilities from 1997 to 2009, giving many workers the impression that their pension vested every year as a matter of practice, not as an exception. This "new normal" was interrupted by the financial crisis in 2009, which finally brought the pension fund under the 125 percent threshold, according to Wilson and Pickering-Jones. For those who had fewer than five years of service, this meant that they were vested for part of it, but not all, as in the case of Walker.
"Everyone assumed they were getting vested after a year. This is where it kind of gets convoluted. People that may have joined in 2007-2009, they were getting vested for that service, but they were sort of `half-pregnant,' " Wilson said.
In the months after Conrad and Walker left, the pension office was moved out of the Finance Department and into Human Resources, under Pickering-Jones.
Wilson and Pickering-Jones went through the books and discovered that the change in the calculation of the pension payment was something that needed to go through Town Council for it to be valid, Pickering-Jones said. They brought it before Town Council in the July 18 meeting, along with a general restatement of the pension plan.
The discovery of the excess payments did not come about through a letter from the IRS, as has been reported here and in other news outlets, the officials said.
"It wasn't the IRS that brought it out, quite frankly it was Cheryl and I," said Wilson.
The amendments passed through the Board of Finance and Town Council, but were considered null in the opinion of town counsel, Chris Jarboe, on the basis that there was no actuarial presentation on the fiscal ramifications of the amendments at the meeting, a legal requirement for passage.
At the Board of Selectmen meeting following the passage of the plan, amid some uproar from townspeople, Republican First Selectman Robert Mallozzi proposed to look into hiring a financial firm to do a review of the administration and practices of the Financial Department, in order to get the facts and set things straight.
Walker said that when the issue of excess payments came up, he investigated it himself and found that there was an error.
"After it became an issue, I dug into it and said, `You're right,' " Walker said.
He then wrote the letter alerting the town that he was willing to repay the money.
Wilson and Pickering-Jones made the point that they both believe this was an honest mistake made in an environment of chaos and confusion.
"It wasn't done at all maliciously or trying to give anybody favors," Wilson said.