State Overcompensates Dozens of Retirees - Southern Maryland Headline News

State Overcompensates Dozens of Retirees


ANNAPOLIS (Sept. 11, 2009)—The Maryland pension system overpaid 45 retired non-faculty employees at the Maryland School for the Deaf by a total of $487,000 over 22 years.

Unfortunately for the recipients, it's a mistake that could hurt them more than it does the state.

The error led 45 retirees to count on an amount of money that won't likely continue. It also led an additional 56 active employees to expect more money in retirement than will actually materialize.

An official decision is pending consultation with the state legislature, but the Board of Trustees for the State Retirement and Pension System does not plan to recoup excess payments. It does, however, plan to immediately correct the mistake for active employees and cut excess allocations to retirees beginning next April, according to several members of the board.

Sue Esty, assistant director for the American Federation of State, County and Municipal Employees in Maryland, said some of these retirees have been counting on this money for more than two decades.

"From the state's perspective, maintaining that level of benefit is not necessarily expensive. There are people who are receiving $1,100 a month and it would go down to $800," Esty said. "It means a lot to the retirees."

State Treasurer Nancy Kopp said those retirees whose benefits are in question gave hands-on care at the Maryland School for the Deaf during their work for the state.

"Put a human face, as the board had to do, with people who retired thinking these would be their benefits," Kopp said.

The overpayment, which was discovered in May, resulted from a decades-long miscommunication between the State Retirement Agency and the Central Payroll Bureau. The Central Payroll Bureau classified 10-month non-faculty employees at the Maryland School for the Deaf as full-time for working the 10 months the school is in operation, despite the fact that typical full-time state employees work 12 months.

"It's critical that the data reported to us is accurate," said Kenneth Reott, deputy retirement administrator at the retirement agency, because the data is used to determine retirement packages.

Though the salaries were reported accurately, the full-time classification of these 10-month workers tripped up the retirement agency.

Like all other full-time state employees, the State Retirement Agency built retirement packages for these workers based on a salary—the amount in an individual paycheck, issued every other week by the payroll bureau—that it assumed was being awarded on each of the 26 paydays that occur in a year.

Instead, non-faculty workers at the Maryland School for the Deaf received an every-other-week paycheck only during the 10 months they worked, which amounted to 21 paychecks each year.

"They were reported to us as full-time employees at a certain salary," said Dean Kenerdine, executive director for the state's retirement agency. "What was not clear to us all these years was that these individuals were in fact not working two months out of the year."

For state employees eligible for a pension a certain amount is withdrawn from each pay check and deposited in a trust fund that invests the money and later reallocates it to retirees through the state pension board, said Kenerdine.

The retirement agency overestimated their annual income and miscalculated the retirement benefits due to them.

Since their retirement, the state has overpaid the 45 retirees by amounts ranging from $700 to $35,000 each.

Sen. Rona Kramer, D-Montgomery, was one of several legislators who worried that if the Maryland Retirement Board decided not to recoup the funds it might set a precedent without knowing the severity of the problem.

Members of the board expressed confidence in the rarity of the system glitch, which they described as a reporting error and not a computer error, and did not think the problem would reoccur.

"This is an anomaly in the system and the only anomaly in the system," said Kenerdine.

The Maryland Department of Budget and Management has begun a study at every state agency to ensure all workers labeled as full-time uniformly receive 26 pays per year to ensure a similar incident has not occurred for other employees. Each state agency is scheduled to report back to the Department of Budget and Management by September 18th.

Capital News Service contributed to this report.

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