After the smoke cleared in the controversy of whether the city of Portsmouth should have paid into the Firefighters pension fund, the city will owe $285,000, and they escaped without interest and penalties, which could have made that amount nearly double.
In 2002, the 2003 forward contracts with the fire department the city changed the way it handled vacations. City Solicitor John Haas said, while the change was stuck in the holiday section, it had nothing to do with holidays.
“They took vacation hours and put them in the holiday section of the contract,” Haas said. “When that occurred, they gave the fire department employees the option of taking 120 hours of straight pay or two extra days vacation. Most of the employees chose the 120 hours pay instead of taking an extra vacation.”
Haas said, from 2003 through the current year, no pension was paid on those payments.
“The issue came up at some point last fall and it was brought to my attention probably in March of this year that some of the members of the fire department raised an issue about the pension and whether it was being paid on those hours,” Haas said. “They raised the issue with the Pension Board. The Pension Board was unaware of that change and had no idea whether it was pensionable or not because it was never reported.”
The Pension Board determined those hours are pensionable and eventually informed the city they have to pay $285,000 because the money was paid out in the year that it was accrued, making it pensionable.
“I went up there with (City Auditor) Mr. (Trent) Williams and one of the Auditor’s Office employees, to meet with them. Their attorney was there along with four or five members of the Pension Board,” Haas said. “The main purpose in being there was to understand because up to that point I didn’t understand why it was pensionable. They explained that to me and I had to agree with them after their explanation.”
Haas said the good thing that came out of the scenario was that, despite the fact that nobody ever called them to tell them about the issue, the Board felt it was a close call and decided to waive interest and penalties saving the city of a lot of money. “That’s to their detriment because they’re the ones who are going to be paying the pension out to the employees like they collected it over the last 13 years or so.”
To give City Council an idea of how high the penalty could have been, Portsmouth City Manager Derek K. Allen said the penalty was compounded monthly, which could have made the total some $500,000.
“That’s a good thing,” Allen said. “That’s the silver lining.”
How will it be paid?
“They said we could make payments, but we’ll just pay it,” Allen said.
Reach Frank Lewis at 740-353-3101, ext. 1928, or on Twitter @franklewis.