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GoLocalProv Investigation Uncovers 25 Illegal Pensions in Johnston

Thursday, August 26, 2010

 

A GoLocalProv investigation has uncovered at least 25 firefighter disability pensions in Johnston that are illegal.

These illegal pensions are crippling the town’s retirement system, causing the annual town contribution to the fund to balloon from $1.6 million in 2000 to $3.5 million in 2007, according to town records obtained by GoLocalProv. (Click here to see the documents.)

“They are illegal pensions because they are not calculated correctly and in many cases they did not go through the proper process,” said Joe Rodio, the legal counsel for the town of Johnston, who was responding to an open records request from GoLocalProv.

The 25 disability pensions run afoul of two state laws. One says that disability pensions cannot be more than what a firefighter earned while on the job. (Click here to read it.) The other law mandates that disability pensions be approved by the state retirement board. (Click here to read it.)

Town records indicate that not one of the 25 firefighters’ disability pensions was authorized by the state retirement board.

Illegal Pensions Add to Cost of Retirement System

These illegal pensions have added to the burden of the town pension system. “It’s the most significant component of the unfunded liability,” Rodio said. In 2009, the pension system had an unfunded liability of $47.6 million, according to an actuarial study by The Segal Group, a national company.

Last year, the town owed the pension system for firefighters $3.7 million. Rodio estimates that Johnston can cut that by approximately $2 million each year for the next ten years by ending the illegal pensions.

Pensions Violate Second Law

One law that the disability pensions violate says they cannot exceed the salary that a firefighter made during his career. The law says that the benefit should range from 66.66 percent to 100 percent of his salary.

But the town based their benefit on more than salary—taking into account longevity pay, the clothing and maintenance allowance, holiday pay, and severance pay. After 2001, the town added 75 percent of overtime pay to the calculation, according to Rodio.

For example, former fire Chief Victor Cipriano, who retired in 2005, was given a retirement benefit of $70,246.40 in his first year. That was based on 66.66 percent of his total compensation—including not only his salary, but also the other benefits he received, such as the clothing allowance and overtime.

Had his disability benefit been calculated solely on the basis of his salary—as required by law—he would have been entitled to a smaller pension of approximately $50,000, town records show.

State Retirement Director Confirms Claim, But Disputes Law

Frank Karpinski, the executive director of the Employees’ Retirement System of Rhode Island, confirmed that the state retirement board had not received any requests to review disability pensions for Johnston firefighters.

But he disputed Rodio’s interpretation of the law. Karpinski said the retirement board only had to review pensions for disabilities that are not caused by the job. Rodio maintained that the board still needed to authorize regular disability pensions as well.

 

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