Outrage over ‘Second Pension’ for Esserman
Thursday, February 24, 2011
Members of the city retirement board were outraged to learn yesterday that Providence Police Chief Dean Esserman is due to receive two retirement benefits—a regular city pension plus a private retirement account in which the city has invested more than $100,000.
One board member yesterday called it a “cash cow.” Another said it was a “tax shelter.”
“We have widows of police and firemen who made the ultimate sacrifice … are they afforded this benefit?” said Kerion O’Mara, a retired police officer who himself was seriously wounded in a 1989 shooting.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST‘How did this happen?’
O’Mara quoted a city ordinance that says all employees receiving a city pension “shall receive no pension or retirement allowance from any other pension or retirement system supported wholly or in part by the city.”
“My question is, how did this happen?” O’Mara asked.
The benefit was provided to Esserman in his 15-page employment contract which was signed in January 2003. According to a copy of the contract obtained by GoLocalProv, the city promised to make annual payments into a tax-free investment account known as a Section 457 Plan. In 2003, the city contributed $12,000, increasing that amount by $1,000 each year. By 2010, the benefit was worth an estimated $18,000.
Soon after his contract expired last month, the city moved swiftly to eliminate the benefit, according to Councilman John Igliozzi, who chairs the Finance Committee. In a Jan. 31 press release, the city described it as a “voluntary” move by Esserman.
Esserman was ‘kicking and screaming’ to keep benefit
But Igliozzi said that wasn’t what really happened. “Esserman didn’t volunteer to take it out. It was done by the council leadership and myself saying, ‘Hey, you know, enough is enough and we’re not obligated to pay that second pension anymore,’” Igliozzi said. “He was kicking and screaming for the additional funds.”
Members of the retirement board demanded answers on how the benefit had been approved in the first place—especially since it had to go before the council for ratification. “Did you have any idea there was a conflict in the ordinance?” board member James Potenza, a Fire Department captain, asked Igliozzi.
Igliozzi said he personally had not been aware of the problem at the time of the vote.
City attorney Kenneth Chiavarini said the private investment account did not qualify as a pension supported by the city—as defined in the ordinance.
‘An illegal contribution’
Board members still questioned whether the city had been following proper procedures. In order to be in a 457 plan, Igliozzi said the money has to be taken out of your salary. But Igliozzi said that wasn’t the case with Esserman, whose salary this year is $168,000. “He wasn’t investing it. The city was just cutting a separate check on his behalf,” he said. “I don’t understand how he can be in a 457.”
“This definitely has the impression of an illegal contribution,” Potenza said.
Even though Chiavarini told the board that it did not have jurisdiction, the board decided to put the matter on the agenda for its next meeting and O’Mara asked Igliozzi if the Finance Committee of the City Council also could look into it. “I’m giving you a letter right now,” he said.
“This is a joke,” he added, referring to Esserman's employment contract.
Esserman did not respond to a request for comment.
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