By Charles Sercombe
One of the more controversial, and curious, items in our recent story about the city employee pension roll had to do with a deceased police chief leaving his pension to his kids.
The common response was: How could this have happened?
Some blamed past city officials who agreed to a cozy deal.
But that’s not the case, as it turns out, and the pension deal is not indefinite.
The deal was actually worked out by a statewide pension system that Hamtramck is a part of, called The Municipal Employees’ Retirement System (MERS) of Michigan.
Acting City Manager Kyle Tertzag and some city councilmembers met with a MERS representative on Tuesday to discuss pension issues as well as the case of a brother and sister being named beneficiaries of their late father’s pension.
MERS allows employees to name either just one beneficiary or multiple beneficiaries. When it is a matter of a single beneficiary, the pension lasts for the life of the beneficiary.
In most cases that would be a spouse.
In the case of the deceased police chief, his wife had died years before he retired. He named his son and daughter as beneficiaries.
But there’s a catch. MERS places a cap on how long they can collect the pension, which is no more than 20 years.
But the deal gets a little more complicated than that. The employee can choose to allow the beneficiaries to collect for five, 10, 15 or 20 years. The more years they collect, the smaller the pension payment.
Back to the case of the deceased police chief. He died in 2002, just one year after retiring, at the age of 60. The average life expectancy of Americans is 77 years.
He opted to allow his children to receive his pension for 15 years, according to MERS records. They are able to collect for 14 years since their father collected his pension for one year.
His monthly pension was about $6,000 a month, or $70,000 a year. By the end of the pension run, the two siblings will have split $980,000, paid by Hamtramck taxpayers.
But before anyone thinks the kids won the equivalent to the lottery, keep in mind that in actuary terms, the retired chief would have collected that amount anyway if he had lived an average lifespan.
Acting City Manager Kyle Tertzag cautioned against rushing to judgment about the amount paid out to the siblings.
“There are people behind these numbers,” Tertzag told The Review. “I’m sure they’d rather have their dad back.”