The $1.3-million overpayment to the city of Milwaukee plan was part of a $4.5-million overpayment made by the underfunded state public pension as a result of a clerk recording a misplaced decimal point, the Milwaukee Journal Sentinel reported. State officials have already recovered $3.2 million from the Milwaukee Public Schools’ supplemental early retirement plans, according to the newspaper.
The Department of Employee Trust Funds, which administers the state pension plan, adjusted the Milwaukee Public Schools retirement plan account as soon as an auditor pointed out the error. Through an account adjustment, the department actually only took back only $2.7 million to reflect the decline in the investment’s value.
At the end of 2002, the $50.9-billion state retirement fund was 84% funded according to the Department of Employee Trust Funds.
Whether the state gets the rest of the money is far from certain at this point. Rudolph Konrad, special deputy city attorney, told the Journal Sentinel that he hoped to issue an opinion about whether Milwaukee has to reimburse the money in about 10 days. But, even if Milwaukee decides to pay up, the state pension plan will receive $200,000 less, or $1.1 million to reflect the loss in the value of the investment. The city is no longer a state plan member.
“If the city decides they do not need to pay the money back to us, we’ll explore our options with legal counsel,” Robert Willett, the controller for the state pension plan, told the newspaper. “We believe we have a fiduciary duty to recover that money.”
Variable, Fixed Fund Returns Off
The mistake came about when the state investment board told the pension plan administrator that the February 2001 return for its all-stock variable fund was negative 0.089% when it was actually negative 8.90%. It said the return for the fixed fund, which contains a stock and bond mix, was negative 0.046% when the return was actually negative 4.6%. The school system plan was in the variable and fixed funds while Milwaukee was only in the fixed fund.
According to state pension officials, the return figures for Milwaukee and the school system plan were e-mailed to the administrator separately so the administrator could break out their performance from the rest of the state pension fund and that the decimal point problem originated in the e-mails. The return figures for the state pension fund weren’t affected by the error. Officials said the board now has “extra sets of eyes” reviewing source documents and e-mail before it goes to the state pension plan administrator.
The nearly 500,000 participants in the plan include current and retired public employees of the state and nearly every county, city, town, village and public educational institution. Only the city of Milwaukee and Milwaukee County, which have their own pension systems, are not part of the state plan – although Milwaukee County school districts, suburban governments and technical colleges are covered by it.