Troy overpays on pensions by thousands, seeks to recoup

By: Brendan Losinski | Troy Times | Published January 25, 2024

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TROY — After a handful of errors in the processing of Troy’s pension plans, some recipients of those pensions are taking issue with being asked to pay back money the city says they weren’t owed.

Among the residents taking issue is Janet Lazarus, who now resides in Madison Heights. Her husband, Steve Lazarus, was a longtime employee of the city of Troy. Steve passed away in 2010, leaving Janet, as his beneficiary, to receive his pension.

“Last September, I received a letter from the city of Troy’s attorney, (Lori Grigg Bluhm), and the Troy controller, (Dee Ann Irby), stating that I had been overpaid each month by $74.14 for 13 years, amounting to $12,010.68,” said Lazarus. “The amount I receive was set by the Board of Trustees when my husband died, not me. In the letter, they wanted total repayment of the overpayment.”

Bluhm confirmed the errors were made, stating they were due to clerical errors over the course of several years that weren’t caught until a new city controller was hired and performed an in-depth review.

“There were a very, very small amount of retirees where there were errors discovered,” she explained. “It was based on an in-depth review of documents and the amounts we had been paying because we had a new controller come to the city. … One potential example is that when their retirement was calculated, it was a situation of getting a certain amount before age 62 and when they turned 62 it wasn’t actually reduced. … We did an audit of all retirees’ payments so this won’t happen again. We also have a diary system when each person turns age 62.”

Lazarus said that the issue was discussed without the input of those receiving the pensions and that the outcome was unsatisfactory.

“The Board of Trustees held a closed meeting that neither myself or my attorney were allowed to attend concerning my payments at the end of October 2023,” said Lazarus. “This was to discuss how I was to be penalized for the city’s error. The board decided to correct my monthly check by reducing it by $74.14 a month, which would make it the correct amount. Then, they say they will take out $155 per month — towards the amount that I supposedly owe — as a permanent reduction for the rest of my life. The $12,000 would be repaid to the city in six and a half years.”

Lazarus said she has no issue with repaying money she was not owed, but takes issue with the lack of a time limit on the changes to her pension payments.

“If I live another 10 years, they would stand to get back $18,600, a huge bonus to the city of Troy, and an overpayment of $6,000. There should be a cap of six and a half years, which would be a more appropriate time period,” she said. “The city of Troy is making all of these demands without any consideration toward me or my financial situation as an 82-year-old single woman living on a fixed income. I depend on my husband’s pension every month.”

Bluhm defended the decision, stating that there is no guarantee the recipients will live long enough to repay the full amount owed, and thus, the city could stand to never get the money back.

“They were given a couple of different options: repaying it in a lump sum or having the actuary take into consideration what is owed and adjust the retirement payments for the duration of their lifetime,” said Bluhm. “We’re both taking a risk on that. They could have just paid the amount back. They probably chose it because this is what made the most sense to them. It’s a gamble on our part. There was one individual who passed away after only a month of these payments getting paid back.”

Rose Otto-Cepel, a former employee of the Troy Police Department for more than 25 years, spoke at the Troy City Council meeting Jan. 9, stating she was similarly affected by the errors in the pension plan.

“When I retired, the city promised me a monthly pension amount for the rest of my life,” she said at the meeting. “I was widowed twice and lived on a fixed income. I took out a home equity loan based on the city’s promise to me. Now I am at risk of being unable to pay. The city is cutting my benefits 30% because of its errors running its pension. This is the second time the city has cut my pensions due to their own errors. Now it is going back on its word for the second time, and the city wants me to pay for its mistakes. The city’s decision to do this hurts me and other retirees who rely on the city’s promises.”

She described this payment arrangement as not only damaging to her financially but as a betrayal.

“The city is supposed to act as an expert under Michigan law when running its pension. How can the ‘expert’ make so many errors?” Otto-Cepel said at the meeting. “The city’s pension is well funded and can afford to pay what is promised. … (I’m) being asked to pay back $39,050.85 due to their errors. … If the city followed the same laws that apply to nongovernment plans, they would not be allowed to do this.”

Bluhm said it is up to the city officials to be responsible stewards of the city’s funds.

“It was, I think, six or seven individuals (affected by this). Each case was different, so we had one employee who retired only a couple years ago. Some retired several years ago. … They all, thus, owe back different amounts of money,” she said. “It’s the obligation of the retirement board to make sure that they are looking out for all of the beneficiaries and retirees. They need to protect the funding sources so all the retirees are covered. … It’s a very unfortunate situation. It’s not something that we wanted to see happen, but mistakes happen when humans are involved.”

Lazarus said the only course of action left to her appears to be legal action.

“I would ‘appeal’ this decision, but the city of Troy does not have an appeal board,” said Lazarus. “So, I sought legal help through the union my husband was a member of during his employment. Where is the city of Troy’s responsibility to their error and a degree of fairness?”