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Will Duluth city retirees have to pay back miscalculated retirement benefits? | Duluth News Tribune | Duluth, Minnesota

Published December 16, 2012, 12:00 AM

Will Duluth city retirees have to pay back miscalculated retirement benefits?

The Duluth City Council will decide Monday whether to help former city employees who received retirement benefit overpayments or ask them to fork over the excess money they collected in years gone by.

By: Peter Passi, Duluth News Tribune

The Duluth City Council will decide Monday whether to help former city employees who received retirement benefit overpayments or ask them to fork over the excess money they collected in years gone by.

Councilor Linda Krug said 108 retirees were affected by miscalculated benefits they received from the Public Employees Retirement Association, commonly referred to as PERA. Most retirees face the prospect of having to repay $3,000, but a few are confronted with greater debts, including one as large as $18,000, she said.

Krug said she would support a plan to pay off the retirees’ debts by using money the city is due to receive from PERA itself.

David Montgomery, Duluth’s chief administrative officer, said he expects PERA to return about $395,000 in overpayments to the city. Meanwhile, he said PERA will seek about $305,000 in repayments from retirees. If the council chooses to cover those repayments, it would still come out about $90,000 ahead.

Alternatively, Montgomery said the council could leave retirees to their own devices and pocket the whole $395,000 windfall.

Krug said it didn’t seem appropriate to hold retirees responsible.

“It wasn’t their error,” she said. “These people are on fixed incomes, and they have bills to pay. This is a situation where the city has an opportunity to make things right.”

City Councilor Sharla Gardner said she was of the same mind, calling the repayment plan “the most fair option to make everyone whole.”

Retirees who received overpayments in the past will see smaller future payments regardless of the City Council’s actions Monday, as PERA adjusts its calculations.

Likewise, all Duluth city employees who remain on the job today but who overfunded their retirement accounts in previous years will be reimbursed for those overpayments by PERA, despite whatever happens Monday.

Initially, PERA had sought to reduce more city retirees’ benefits and claw back nearly $1.8 million in past overpayments. But the Minnesota Court of Appeals ruled in August that PERA should include deferred compensation the city of Duluth began offering employees in 1995 to calculate retirement benefits.

The same court ruled PERA could reduce the benefits of city retirees who chose not to accept deferred compensation from the city and instead applied that money to pay off insurance costs.

Will Duluth city retirees have to pay back miscalculated retirement benefits? | Duluth News Tribune | Duluth, Minnesota.

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