Maplewood sues fire relief organization over surplus pension fund money

Since Jan. 25, Maplewood has been transitioning its fire department from a model employing mostly part-time firefighters to a one employing entirely full-time firefighters. 

The city expects this change will save money long term, although it meant terminating the employment of the department’s 20 part-timers who couldn’t snag one of the nine new full-time positions.

Now, the city is suing the Maplewood Fire Relief Association to prevent it from accessing funds for payouts to its part-time firefighter members. 

The relief association is a nonprofit organization that oversees the part-time firefighters’ pension fund, which has accrued money over the years from the city’s general tax levy, fire state aid payments and some donations.  

The heart of the dispute is a pension fund surplus of between $1.5 million and $1.8 million. The city and the relief association each accuse the other of trying to take this money for itself.

 

Severance package

A Feb. 28 statement from Maplewood City Manager Melinda Coleman alleged that the relief association held “secret meetings” and changed the structure of its pension fund as well as its beneficiary rules in order to give members money that they had not yet earned. 

She explained that city staff worked with the part-time firefighters to create a fair severance package, and the city even made a “generous severance offer” to those being let go, but after learning Feb. 21 that some members of the relief association took “steps that could allow them to raid the part-time relief association’s pension fund,” the city fired the remaining part-timers at 6 p.m. Feb. 28, nine days before they were scheduled to be laid-off.

Brian Rice, an attorney for the relief association, said that the average member of the association worked about 1,000 hours a year, earning only about $13 an hour, but one of the benefits to the job was the pension that was earned over time. He explained that the pension is based on the number of years of service, but it’s a graduated schedule.

“So after you work five years you’re vested at 40 percent ... The average member is probably vested at about 70 percent,” Rice said, adding that for the part-time firefighters working to earn 100 percent of their pensions, the elimination of their positions was like the city “chopping the ladder” out from beneath them.

The city’s severance offer was contingent upon the relief association dissolving itself, which the members did not want to do. However, if the association were to dissolve, there is a statute that grants the city any of the relief association’s excess money.

Rice explained that the severance package the city offered to pay included about $1,000 per year of service to each displaced member, which for the average member equaled about $15,000. He added that the city would have paid about $250,000 total.

“The city made a $250,000 offer to get $1.5 million of pension fund dollars,” Rice said. “The relief association members met and voted down that severance offer unanimously.”

 

‘Secret meetings’

The city’s suit identifies the so-called secret meetings as a Jan 28 meeting when members approved bylaw amendments giving deferred members voting rights and authority to serve on the board of trustees, and a Feb. 15 meeting when the members approved bylaw amendments increasing benefits for all members.

Rice said that there were no secret meetings. He said that members did hold a meeting, as is their right, and that a notice was posted at the fire station just as the organization always had done.

Based on a recommendation from the state auditor, on Feb. 15 the organization converted its plan from a lump sum plan to a defined contribution plan, “which would allow the members to access the assets of the relief association,” Rice explained.

Coleman said that in at least one case the extra payout could be as much as $130,000.

“Minnesota law is clear that excess money in the fund [is to] be used to benefit the EMS/fire service overall, not a small number of individuals,” she said.

The suit added that the clear purpose of the amendments adopted Feb. 15 was to pay all but 10 percent of the special fund money to individual firefighters, ensuring there would be little money left to be returned to the city, “despite the City’s significant historical financial contributions to the special fund.”

The city has contributed about $1.5 million to the fund since 2000, according to the suit, which explains that the city’s contribution represents funds levied upon Maplewood taxpayers.

Rice argued, “They haven’t contributed anything in the last six years. The money that’s in the fund now primarily comes from the state aid formula that every city gets for this purpose.”

Said Coleman, “Maplewood taxpayers would not stand for any group of part-time workers engineering payouts to themselves for as much as $130,000 in excess of what they’re owed, particularly without proper public scrutiny.”

 

Lawsuit aims

According to the suit, the city also argued that the relief association members did not have the right to make amendments because the relief association is governed not by members, but by a board of trustees, which includes three municipal trustees who were not notified of the meetings or the changes that would be proposed at the meetings.  

In the lawsuit, Maplewood is asking a judge to invalidate the disputed plan and the actions of the relief association at its “secret” meetings. The city is also asking a judge to award legal costs to the city and to prevent the relief association from taking the actions again.

Rice noted that the city is already in the middle of another legal battle, referring to the lawsuit the city initiated against the Ramsey/Washington Counties Suburban Cable Communications Commission II.

Said Rice, “They seem to like litigation. Management by lawsuit, I guess, is their mantra.”


 

– Aundrea Kinney can be reached at 651-748-7822 or akinney@lillienews.com

Rate this article: 
No votes yet
Comment Here