In The News › New Orleans firefighters are inflating pension benefits, Landrieu administration alleges

New Orleans firefighters are inflating pension benefits, Landrieu administration alleges

By Robert McClendon | The Times-Picayune

April 25, 2015

The New Orleans firefighters’ pension fund was already in the early stage of collapse in 2008, but its cash-flow bleed, which had been dripping away for a decade, was about to turn into a gusher of red ink.

Just as the financial crisis was beginning to eviscerate the fund’s assets, the Louisiana Legislature adopted a bill making the system’s benefit formula more generous.

The legislators knew the new formula would add to the city’s expenses. An actuarial note attached to the bill estimated the move would cost about $1 million each year.

They may not have known, though, that the Fire Fighter Pension and Relief Fund Board of Trustees, dominated by firefighters who held a bulletproof majority of its seats, would interpret the new rules in such way as to make them far more generous and therefore costly to the city than the fiscal note foresaw.

The pension board has been allowing firefighters to retire with maximum benefits three years earlier than they are entitled to under the law as it is written, according to Mayor Mitch Landrieu’s administration. Those who retire after 30 years are pocketing 10 percent more of their salary in retirement than intended, according to the fiscal note.

Dozens of firefighters since 2008 have retired under the board’s liberal interpretation of the law. As a result, hundreds of thousands of dollars, perhaps millions, have been improperly doled out to retirees in the form of inflated benefits, according to the administration.

Facing a pension fund on the edge of default and under increasing pressure from the firefighters on other legal fronts, the Landrieu administration has signaled it is preparing a legal assault of its own to claw some of that money back. If successful, hundreds of firefighters would have to work longer than they planned, and an unknown number of retirees would see their checks reduced. They could even be forced to pay money back that they thought was theirs.

“The city will continue to work with the pension board and encourage it to get into compliance with the law,” Brad Howard, a Landrieu spokesman, said in a statement. If the firefighters’ representatives on the board refuse to negotiate or even consider level-headed and reasonable solutions, he said, the city will pursue them in court.

The firefighters’ lawyer, Louis Robein, concedes the benefit formula the board uses is more generous than a plain language reading of the statute would allow, but he said the method is defensible in light of the fund’s history and the various changes in its rules over the years.

Robein also noted that a plain-language reading of the law unambiguously requires the city to pay in its annual contribution into the fund, and Landrieu has withheld millions from the fund since taking office, saying the firefighters were mismanaging it.

“If Landrieu were a strict constructionist, he would’ve paid what he owed. “ Robein said. “The law says ‘shall contribute.’ It doesn’t say contribute if you feel like it.”


The dispute over the benefit calculation comes down to dueling math equations.

In any pension system, a retiree’s benefit is calculated as a function of his years of service. Each year, the worker’s future retirement benefit grows by a few percent so that the longer he works, the more of his final salary he will continue to earn in retirement.

The firefighters and the city are at odds over the percentage the firefighters should have earned each year under the 2008 rules. As a result, there exists a wide gulf between the retirements that firefighters have been collecting and the benefits that the city says they are owed. In some cases, firefighters could potentially be collecting checks 15 percent larger than they would under the more conservative interpretation the city supports.

Under the plain language interpretation of the statute, a firefighter wouldn’t be able to retire at full salary, the maximum allowed under the law, until logging 33 years on the job. Under the firefighters’ interpretation, they have been able to retire with the maximum benefit at 30 years of service.

It’s unclear exactly how many retired firefighters may be benefiting from the generous benefit calculations, so it’s impossible to say how much their alleged lagniappe has cost the fund and, by extension, city taxpayers.

“We tried to look at that issue. Unfortunately, we didn’t feel like we had enough information and time to calculate that,” said Vijay Kapoor, a pension expert and lawyer who served as a mediator during recent negotiations between the city and the firefighters. The only way to know for sure how much additional money the firefighters’ interpretation withdrew from the fund would be to go through all of the pensioners one by one and recalculate their benefits, he said.


The firefighters point out their benefit calculations are nothing new. The city has been well aware of their method for years. The Landrieu administration only begun to raise it as an issue when the firefighters pressed legal claims against him, said Nick Felton, head of the firefighters union.

The firefighters Friday (April 24) continued to escalate the legal confrontation, seeking contempt charges against Landrieu and the City Council in an effort to collect $75 million in back wages the city owes them.

“They’ve had ample time to refute those numbers,” Felton said. “But now that the doors are closing, that the day of reckoning is coming near, they want to grasp at straws.”

The city controls three of the pension board’s seven seats, but none of the administration’s representatives ever cast a vote against a pension award until this month when Fire Department Superintendent Tim McConnell and city Finance Director Norman Foster both voted against several benefit awards, citing the liberal calculation. The city’s third seat is currently vacant.

McConnell was on the board as a firefighter representative in 2008 when the law was approved. He voted in favor of using the liberal benefits then and continued to do so when Landrieu made him head of the department.

Firefighter representatives on the board grilled him over the apparent change of heart.

Board member Tommy Meagher, apparently anticipating McConnell would attempt to plead ignorance, laid a trap. “Did you not know what (you) voted to pass in 2008?” Meagher asked.

When McConnell said he was never intimately involved with pension calculations, Meagher pulled out a copy of McConnell’s job description at the time. The first highlighted line: “Develop a complete comprehension of formulas necessary to calculate pensions.”

McConnell later said in an interview that he had voted in favor of the liberal calculations on the basis of Robein’s legal advice. In addition to representing the firefighters’ union, Robein also represents the pension board.

Foster said that and other members of the administration did not become fully aware of the pension calculation issue until the Bureau of Governmental Research, a watchdog think tank, discovered it in 2013 and brought it to his attention.


Regardless of their actions in the past, McConnell’s and Foster’s votes at the recent meeting were almost certainly a prelude to forthcoming legal action.

When the firefighters sued Landrieu in 2013 in an attempt to force him to pay the city’s required contribution into the fund, the administration filed a counter suit that argued he was within his rights because the board was illegally calculating its benefits.

The city’s counter suit was eventually thrown out, but a court did rule that Foster, as a member of the board, had standing to sue the others if he thought it in the best interest of the pension fund.

Now that Foster has gone on record voting against the firefighters’ benefit interpretation, he is well placed to take them to court.

The implications of a legal battle over the accrual calculations stretch well beyond the current firefighters or even those who have retired since the 2008 rules were set in place.

One of the firefighters’ primary legal arguments in defense of their calculation method is its long-standing use. The particulars of the calculation have changed as the Legislature repeatedly amended the plan over the years, but the fundamental method of awarding higher accrual rates under certain circumstances dates back to the late 1990s, according to Robein.

If the city successfully argues that the pension board’s calculation is illegally generous, Landrieu could pursue clawbacks going back two decades.

More likely, based on statements from the administration, Landrieu’s lawyers will try to convince a judge to count the alleged past overpayments against the $100 million in court judgments that the firefighters have won against the city in recent years.

Going forward, firefighters would face much stingier benefits, especially compared with those of their colleagues in the state retirement system. Benefits for firefighters would be up to 25 percent lower than those in the state plan.

“It’s a pattern with this administration of trying to penalize the firefighters whenever they can,” Felton said.

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