News Column

Retirees prepare for renewed legal fight against Annapolis

May 30, 2014

By Jack Lambert, The Capital, Annapolis, Md.



May 30--Twelve years ago, Edgar Bowen was one of 62 retirees who sued the city of Annapolis to preserve their pension.

Today, Bowen is 64 and preparing for another legal battle, as he and other retirees feel the collectively-bargained changes to the city's retirement program violate the rights they won in court.

"They turn around and negotiate for 14 months with the unions to come up with this so-called beneficial plan without saying one word (to retirees)," said Bowen, who retired a corporal in the Annapolis Police Department.

Funding retirement plans for former police and firefighters has dogged the city for years. The plan was 89-percent funded in 2010 and projected to fall to 43 percent in 2025 unless changes were made, according to a letter from Paul Rensted, the city's human resources director.

Rensted declined to comment for this article, citing possible litigation.

Former Annapolis police and firefighters are classified under four retirement plans. Individual retirees receive benefits from the plan in place upon their retirement. Two of the plans contain language in the city code tying pension increases to active-duty employee salaries.

"Each retired member's pension shall be increased by the same percentage as any increase in the pay scale for members of the same rank and years of service who are on active duty," the code reads.

Bowen and other retirees sued Annapolis in 2002 seeking retroactive payments dating to 1995. After six years of legal battles, the state's Court of Appeals ruled in favor of the retirees. The Circuit Court of Anne Arundel County later issued a declaratory judgement for pension increases, despite a premonition from then-Mayor Ellen Moyer that the ruling would bankrupt the city.

The city's retirement plan liabilities increased by $6.2 million because of the ruling, according to a 2013 report produced for the city.

Annapolis had suspended adjustments to police and fire retiree benefits since 2009. City employees did not receive pay increases during that time period.

On Oct. 28, the city announced a deal with its four public-sector unions on pay increases. Employees would receive a 10-percent raise over the next three fiscal years. Retirees would receive annual 2-percent increases, regardless of future city pay increases.

The changes immediately fund the retirement plan by 100 percent, according to the city.

Retirees under the old plan were not represented during the 14-month union negotiations. Some felt blindsided when they later learned of changes to their plan.

"When you do something like the city's doing, that has a direct impact on people with limited incomes," said Mike Jones, 68. Jones retired as a battalion chief for the Annapolis Fire Department.

Annual 2-percent increases, in many ways, represents an improvement for both the city and the retirees. Underfunded pension plans previously hurt the city's bond rating with major New York firms. Fitch Ratings Inc. improved its outlook for Annapolis municipal bonds from negative to stable earlier this month partially due to increased pension contributions since fiscal 2012.

The city contributed $200,000 towards the $7 million retirement contribution in fiscal 2012 and $1.57 million toward the $4 million retirement contribution in fiscal 2013, according to Fitch.

A 2-percent increase also is consistent with the annual cost-of-living increases given to retirees over an 18-year period, according to the city.

Yet the survivors of earlier pension legal battles remain wary of the changes adopted by the city. Russell Hall, president of the Annapolis Police and Fire Retirees Association, said if the retirees agree to the 2-percent increase now it effectively abolishes the language of the city code.

The statute of limitations over retirement plans would be exhausted within three years, said Hall, who spearheaded the retires' legal efforts in 2002. If the retirees don't fight for the language now, he asked, what's to stop the city from reducing pensions in the future?

"If we allow them to do this and get away with this, we wasted our six years in obligation to fight for what's legally right," Hall, 64, said. Hall retired as a lieutenant in the Annapolis Police Department.

The city disagrees that the changes to the retirement plan are unlawful. After elected officials trumpeted the 10-percent salary increases in public forums, Rensted noted in a letter that increased employee pension contributions effectively raised take-home pay by only 5.5 percent over the next three years.

The distinction could prove important in future litigation. Maryland law allows a government to modify pension plans as long as the changes do not adversely alter the benefits, Rensted wrote in his letter, citing a pair of rulings by the state Court of Special Appeals.

"The changes are 'justified by countervailing equities for the public welfare,'" Rensted wrote on April 1.

Retirees say attempts to negotiate changes to the pension plans with the city have been unsuccessful over the last seven months. Robert Deso, partner at the Washington, D.C., law firm Deso and Buckley P.C., sent the city a letter on Feb. 28 criticizing "unlawful" changes to the pension system.

"This was not a good faith reform of the pension system; it was a subterfuge to shift the cost of pay raises for active members to the retirees," he wrote.

Deso, who represented Annapolis' retirees in their previous cases, said he expects to take legal action against the city within the coming weeks.

Meanwhile, Annapolis' retirees hope the city will recouple pension benefits with employee salary increases. Doing so would not only follow the law, Jones said, but also guarantee payments for those on limited incomes or future widows.

For many, those payments are a race against the clock. Thirteen of the 62 retirees involved in the original lawsuit against the city have died since 2002, Hall said.

"It's an expensive life out here," Jones said. "When you're living on a limited income, every dime counts."

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(c)2014 The Capital (Annapolis, Md.)

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Distributed by MCT Information Services


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Source: Capital (Annapolis, MD)


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