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Pension discrepancies need to be explained

October 26, 2018; updated November 29, 2018

My original story, posted October 26, is below, under the heading Original story. In that story, I wondered why my calculation of pension for 14 Lansing police and firefighters came out higher than the pension amounts provided to me by the City. I based my calculation on 2016 payroll information, also provided by the City. One possible reason, I surmised, was that the final leave payout figure in the 2016 payroll information included money that could not be included in final average compensation (FAC), one of the factors in the pension calculation.

That turned out to be the answer. I reached that conclusion after examining a detailed report of payments received in the last two years of Michael Keith's employment. He is one of he 14, a firefighter who retired 6/30/2016. At the end of that 15-page report, which was provided by the City in response to a FOIA request, is a "recap" providing totals. Here they are, slightly reorganized.

Payments received in his last two years totaled $204,126.53. His FAC - average annual compensation for his best consecutive 24 months - was $84,769.50. We know this because when we know the pension and service amount and we remember our high school algebra, we can calculate FAC: If pension equals FAC times service times .032, FAC equals pension divided by the product of service and .032. Keith's pension is $67,815.60 and his service was 25 years, so his FAC was $84,769.50.

Double Keith's FAC and we get $169,539. That's quite a lot less than the $204,126.53 he received during his last 24 months, which means $34,587.53 of the compensation he received in that period was not included in his FAC. According to City ordinance, this is what is included in FAC for a firefighter:

• annual base salary

• overtime pay

• acting pay

• ambulance wage differential pay

• longevity

• holiday pay

• field training instructor pay

• retroactive pay (prorated by effective date)

That would seem include only the following items from the recap, although it is hard to tell from the descriptions:

That leaves us $25,408.44 short of the $169,539. Without more information, I can't determine what additional payments were included in FAC, and I don't know how to get that information.

Original story

Based on 2016 wage information provided by the City of Lansing, I calculated pensions for 14 police and firefighters who retired in 2016. I've compared them below with straight life pension amounts provided by the City:

The straight life amounts provided by the City were provided as monthly amounts in the chart below, which is from an August 29 letter. I converted them to yearly for the above chart.

My pension calculations required a lot of assumptions, but they are reasonable. In the Police and Fire Retirement System, pensions are calculated as years of service times FAC times 3.2%. For all 14 retirees, years of service was 25. FAC (final average compensation) is average wages for the employee's best 2 years. I assumed those were the employee's last 2 years.

In 2017, the City gave me 2016 payroll information for all City employees. You can see it here. For each employee, I was given regular wages, overtime, miscellaneous and final leave payout. Here is the info for our 14 retirees:

Regular wages, overtime and miscellaneous are for a partial year - up until the employee's retirement. Final leave payout is for things such as accumulated vacation time. Miscellaneous includes such things as sick leave buy back, longevity and contract signing bonus, according to information I obtained in 2011.

To calculate FAC, I assumed that regular wages and overtime were accumulated at the same rate in the last 24 months as for the time worked in 2016. I combined regular wages and overtime and divided by the number of days worked in 2016 (from this site), then multiplied by 365 to get annual earnings. (I ignored miscellaneous payments.) Then I doubled annual earnings, added final leave payout, and divided by 2, giving FAC.

Once you have FAC, pension can be calculated by multiplying by .8. Eight-tenths is what you get when you multiply 25 by .032. In other words, when years of service is 25, pension is 80% of FAC.

As you can see from the chart at the top, my calculated pension for all 14 retirees is higher than the pension amount provided by the City, and the difference is substantial - over $41,000 in one case. Here are some possible explanations:

• The final leave payout figure provided by the City may include money that can't be included in FAC. Here is what the ordinance says can be included:

For a police officer member, included compensation is defined as annual base salary, overtime pay (including holiday pay), longevity, gun allowance, clothing allowances, sick leave reimbursement (buy-back), shift premium and retroactive pay (prorated by effective date). For a Police Supervisory Division Unit member, the definition of included compensation also includes compensatory time buy-back (up to a maximum of 160 hours), provided that the compensatory time was earned in the same 24 months on which final average compensation is based. For a firefighter member, included compensation is defined as annual base salary, overtime pay, acting pay, ambulance wage differential pay, longevity, holiday pay, field training instructor pay and retroactive pay (prorated by effective date).

• Overtime earned was higher than usual in the time worked in 2016.

• The City is providing bad information, either for the straight life pension or the 2016 payroll. Or both.

• Police and firefighters are getting shorted on their pensions.

The people of Lansing - and our police and firefighters -  need an explanation.

Send comments, questions, and tips to stevenrharry@gmail.com, or call or text me at 517-505-2696. If you'd like to be notified by email when I post a new story, let me know.

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