No easy solutions

Who should pay to fix the retire-rehire problem? Finding a way forward won’t be easy

Cihak

Editor’s note: Today is the second of a two-day series relating to the now-defunct Marquette County retire-rehire policy.

MARQUETTE — While most current and former Marquette County commissioners seem to agree the now defunct retire-rehire program was flawed, some believe it should be revisited and further resolved, while others think it should be left alone.

“I’m still interested in this,” said former Commissioner Jim Cihak, who served on the Marquette County Board when the “opt-out” program was approved in 2004. “From the numbers I’m looking at, over $6 million was paid to retire-rehirees and that’s a crying shame.”

According to information provided to the county by the Municipal Employees’ Retirement System of Michigan, along with supplemental information from county Finance Manager Susan Vercoe, the 34 individuals who participated in either the county’s original opt-out program or the modified version that required a 30-day severance period were paid more than $6 million in retirement benefits from MERS during their re-employment. Two individuals are still employed under the program.

Current Commissioner Johnny DePetro said while there’s “no denying” the program could potentially negatively affect taxpayers, it’s highly unlikely the county will ever recoup that money.

DePetro

“It’s not a simple issue, but it’s a costly one,” said DePetro, acknowledging that many other factors have influenced the county’s unfunded liability in the MERS system, which is currently around $34 million.

Reignited

Cihak and former Commissioner Deborah Pellow said their interest in the impact of the program was reignited by a now settled lawsuit brought on by former county employee and retire-rehire program participant Mary Mantyla.

Mantyla sued the county in 2015, arguing she was not subject to pay a portion of her health insurance under the retire-rehire program. She was awarded around $2,000 following a closed session decision by the county board in December 2015.

While the case was active in November 2015, County Civil Counsel Steve Pence filed a motion in the Marquette County Circuit Court that stated that “under no reasonable definition of the word ‘retire’ was there an actual, intended real separation from her employment.”

County officials later seemingly contradicted that opinion, stating the evidence gathered was “inconclusive” and was presented in an attempt to reach a settlement that was favorable to the county. According to County Administrator Scott Erbisch, the county does not have an opinion as to whether Mantyla had bona fide separation — a requirement for those receiving a distribution from a qualified pension system per the Internal Revenue Service — between the time she “retired” on June 30, 2009, and returned to work in the same position on Aug. 7.

“When I left the county board, it was a done deal on the statewide level,” Pellow said, referring to board’s 2010 decision to rescind the program and a decision by MERS to limit rehires, returning to their same jobs, to working no more than 720 hours each year — exempting workers previously included in the program. “We thought the few that were left would go quietly into the good night. … Then viola, more greed. You get fired up all over again because the program was wrong from the get-go.”

Cihak questioned whether Mantyla’s case was reason enough to revisit the issue as a whole.

“If (Mantyla’s) separation was not legitimate or bona fide, is everyone else’s?” he said.

Current Commissioner Bill Nordeen alleges none of the 34 participants of the program had the bona fide separation required by MERS and the IRS.

“If you’re looking for my opinion as a county commissioner or as an attorney, or both … none of those people had bona fide separation,” Nordeen said. “I don’t care if they waited the 30 days or not, because those people were promised jobs after 30 days. It was window-dressing. That’s all it was.”

However, further resolving the issue would require action by the current Marquette County Board — something Nordeen doesn’t believe there’s an “appetite” for.

“I don’t think the majority of the board wants to do anything about it,” he said, adding that while doing so may be an “ugly thing” and be “dragging everybody through the mud,” it is possible.

Chairman Gerald Corkin seemed to reaffirm Nordeen’s notion.

“As far as I’m concerned, it’s in the history books,” Corkin said.

Concerns

Pellow said she was vocal about her dislike for the program while serving on the County Board. She said she questioned the legality of the program, and reportedly attempted to get a definitive answer at the time as to whether it met IRS regulations.

“We tried fixing it,” she said. “I, at one point in time, said, ‘Let’s turn ourselves into the IRS. Let’s see what we’ve done wrong and fix it.’ But I didn’t have the votes on the County Board to do it.”

The fact that two elected officials were able to participate, said Pellow, indicates “it was a hooped up plan to begin with.”

“You can’t possibly be an elected official and retire on Dec. 31 and take a new oath of office on Jan. 1 and expect that to be a bona fide retirement,” she said. “It’s impossible.”

Pellow said she while she believes the county board is ultimately responsible for the program and its lasting impact, she said the real fault lies with the individuals who presented it to the county.

Pellow cited former Human Resources Manager John Greenberg and former Prosecuting Attorney Gary Walker — one of the original 12 “opt-outs” who performed a legal review of the program — as the “architects” of the policy. The program was presented to the board by former County Administrator Steve Powers during a regular meeting in November 2004. At that time, the board approved it unanimously with little discussion.

When interviewing for the city administrator position in Ann Arbor in 2011, AnnArbor.com reported that Powers seemed to regret not researching potential impacts of the program further before presenting it to the board. When asked if he’d ever made any big decisions without first fully analyzing the situation, Powers reportedly referred to Marquette County’s retire-rehire program.

“The HR director (Greenberg) came to me, and the timing was such where we were trying to balance our budget,” Powers was quoted as saying in the July 12, 2011 article. “In hindsight, I should have said, ‘No, timeout. Let’s think about this. Let’s get an actuarial analysis done.’ As I look back seven years later, I do see it as a decision that was made without perhaps a complete understanding that I should have had.”

Both Pellow and Cihak said the issue needs to be revisited and finally put to rest.

“You’re talking millions of dollars that went out of that pot that shouldn’t have — that wouldn’t have,” Pellow said. “At the end of the day, it boils down to do you want transparency in government or not?”

‘Dead in the water’

For a few members of the county board, the retire-rehire program and the controversy surrounding it has had enough time in the spotlight, and it’s time to move on.

When it comes to current issues facing the county, Vice Chair Joe Derocha said there’s bigger fish to fry.

“Ultimately, as a county commissioner, we’re here to do what’s best for the residents of Marquette County and the county as a whole,” he said. “I’m not sure what the benefit is to regurgitating this thing again.”

The dark store issue, unfunded mandates and providing “fair and equitable” wages to county employees are among his top concerns.

“I’d like to spend my time on significantly meaningful issues that affect our county in a positive way,” he said.

Commissioner Karen Alholm said she doesn’t believe there is “a need for revisiting a program which no longer exists and which had been ‘green-lighted by MERS.”

“The program has been terminated and there are no ongoing residual issues before the county board,” she said. “The Mantyla case was successfully resolved.”

It’s unclear as to whether MERS officials were consulted about the legality of the “opt-out” program. However, Communications Director Jennifer Mausolf said MERS has “never allowed for an ‘opt-out’ of the IRS rules that require a bona fide separation of employment to receive retirement benefits.”

“A bona fide separation means there is no formal or informal arrangement to rehire at any time in the future,” Mausolf said. “As the plan fiduciary, we require both the employer and participant to certify that the separation was bona fide before processing any retirement applications.”

While Commissioner Johnny DePetro said he is in agreement with Pellow and Cihak that the issue was never properly resolved, he believes that it never will be.

“As far as I’m concerned, it’s dead in the water,” DePetro said. “It’s just one of the things we’re going to have to deal with.”

DePetro, however, said the ordeal will “always be a black eye” to the county.

“It ended up costing the county an extra $6 million that I don’t believe we’ll ever recover,” he said. “I don’t think it was a very positive program as far as the taxpayers are concerned, there’s definitely no denying that.”

Newly elected Commissioner Steve Adamini declined to comment with The Mining Journal regarding this issue.

Proposed solutions

While members of the current County Board have shown little to no interest in revisiting the issue, vocal opponents have offered up several potential solutions.

Pellow, as she had recommended while on the board, said she still believes reporting to the IRS would put the issue to rest.

“In my mind, it’s the only way to fix this is,” Pellow said. “Ask the IRS what we did wrong. If you make a mistake, you fess up to it. You pay the piper. The county board just wants to forget this whole thing ever happened, but there’s culpability on their side.”

Cihak, frankly, said the employees should be responsible for paying back the money.

Nordeen said one option would be bringing about a declaratory judgment action against all 34 program participants in court to decide whether there was an actual bona fide separation for each individual employee.

If it was proven that any or all employees did not have bona fide separation of employment as required by the IRS, that information would be handed over to MERS.

“Then it would be MERS’ job to fix it,” Nordeen said.

Another, possibly better, solution, said Nordeen, would be to assign a committee comprised of citizens-at-large and non-employees to review the facts of each individual case and determine itself whether there was a bona fide separation. Again, that information would be sent to MERS.

Heikkila said he thinks it’s MERS’ responsibility to correct the program.

“They were not administering (the plan) correctly,” Heikkila alleged. “The way it was done in Marquette County, it never met the IRS requirements and requirements of MERS. It never met the requirements because (retire-rehire participants) always had the intent to come back to work.”

MERS officials, on the other hand, said the county would have to come forward and say that an employee’s “Certification of Termination of Employment for Retiring Member” was done in error, and MERS would take the necessary steps to correct it.

When referring to the Mantyla case, Mausolf said this has not been done.

“When a participant in our system retires, we require that the employer certify their termination as a bona fide separation,” Mausolf said in an email. “At this time, the County has not advised MERS that this certification for Ms. Mantyla was in error.”

Erbisch said the county does not have any plans to pursue it further at this time.

Kelsie Thompson can be reached at 906-228-2500, ext. 206. Her email address is kthompson@miningjournal.net.

In the chart linked below, the column of numbers on the far right ride of the above graphic were computed by The Mining Journal based on information provided by MERS and Marquette County. The Mining Journal requested Marquette County officials assist in the computations, which Marquette County officials declined to do.

Retire-Rehire Chart

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