The City of Scranton Non-Uniformed Pension Plan board has been hit with a $3 million lawsuit to recover allegedly illegal double-pension benefits to certain employees who retired in 2002.
The suit, filed in Lackawanna County Court by Councilman Pat Rogan and retiree Angela Sulla, claims the pension board violated its duty to properly manage the fund when it started paying double benefits to 35 retirees in 2003. The plaintiffs allege the double payment was not properly authorized by the council, and that the pension board never voted to approve the increases.
The allegations are based on a 2015 special audit report from the Commonwealth of Pennsylvania Department of the Auditor General. The report focused on a retirement incentive of double-pension payments offered in 2002 and 2007.
“The Department’s review of the transactions surrounding the doubling of pension payments has revealed a disregard for the applicable laws governing pension plans by the officials charged with fiduciary responsibility for the plan—the Mayor, city council, and the pension board,” wrote Auditor General Eugene DePasquale in his report. “We found no authorization or city ordinance to support any double-pension payments to city of Scranton employees who retired in either 2002 or 2007.”
The report also found evidence of apparent cronyism, as among the 25 recipients of the double pension beginning in 2002 were the immediate past mayor of the Scranton, a former member of city council, the wife of the pension board president, and the secretary of the pension board.
“This incentive and how it was implemented is of concern not only because of the dire financial condition of the plan,” said DePasquale, “but also because of the failure of responsible plan officials to provide appropriate fiscal oversight of this incentive.”
The total additional annual cost of the double benefits for the 35 retirees is $266,880, which represents almost 25% of the $1,076,140 annual benefit payments paid to all beneficiaries of the plan as of January 1, 2013.
In March, the pension board voted to cut by half the benefits of 22 of the 35 recipients who were still receiving the double benefits. The move saved the pension fund about $14,400 per month in benefit payments. The board pointed out that the double payments were not the fault of the retirees, but of previous city and pension board officials.