City Wins Major Court Victory for Taxpayers
Judge rules closed pension funds must recover overpayments to members dating back to 2000; total likely to exceed $75 million
May 18, 2010 (MINNEAPOLIS) — Taxpayers of the City of Minneapolis won a major victory in Hennepin County District Court late yesterday when Judge Janet Poston ruled that two closed pension funds, the Minneapolis Police Relief Association (MPRA) and the Minneapolis Firefighters Relief Association (MFRA), have a fiduciary duty to recover over $52 million in overpayments of benefits that the funds have improperly paid out to members since June 2000.
The total amount that the funds must recoup, however, is higher than $52 million, since Judge Poston ruled that the funds must calculate the amount they have overcharged the City dating back to June 9, 2000. The City of Minneapolis has calculated that the funds’ overpayment to members from June 2000 through the end of 2009 totals more than $75 million.
In a previous ruling, Judge Poston had identified three ways that the MFRA and MPRA have violated Minnesota law and their own bylaws in improperly calculating benefits to their members, which she ruled has caused Minneapolis taxpayers "great and irreparable harm." She found that since 2003, the MFRA has overcharged the City approximately $19.1 million and the MPRA has overcharged the City approximately $39.6 million.
Judge Poston also found that the funds’ improper calculation of benefits would have cost Minneapolis taxpayers $86 million more in the future.
The Judge has ordered that by June 4, 2010, the funds must present to the Court and City their plans to recover the overpayments, and that they must start recovering the overpayments by July 1, 2010.
Mayor R.T. Rybak said, "The members of these funds should be upset at the lawyers who have made excessive amounts of money to give them very bad advice. These lawyers have dragged the funds’ members through years of litigation to defend a practice that Judge Poston has once again ruled is improper. Her ruling strikes the right balance between our obligation to pay our retirees as much as they have earned and doing justice for our taxpayers."
City Council President Barbara Johnson said, "Yesterday’s ruling — combined with the recently-signed legislation on MERF, which the City pursued for many years — is another milestone on the path of fiscal responsibility that we have followed for many years. It’s one more sign of the seriousness with which we take our obligations to both pensioners and taxpayers."
"This is another good decision for the City’s taxpayers," said Council Member Betsy Hodges, chair of the Ways and Means Committee. "The members and boards of these funds now have their own decisions to make about the plan they want to bring forward to pay the City’s taxpayers back."
Published May. 18, 2010