More than 100 retired City of Omaha employees return to their jobs while drawing pensions -
Published Monday, October 7, 2013 at 12:30 am / Updated at 12:06 pm
More than 100 retired City of Omaha employees return to their jobs while drawing pensions

If Omaha Mayor Jean Stothert has her way, former Planning Director Steve Jensen will be back at City Hall, helping to run the department he retired from four years ago. He'll work on contract, receiving up to $100,000 a year assisting the new planning director, James Thele. That would come in addition to his annual city pension of $114,405. Jensen, who is 61, would become the most lucrative example of a surprisingly common City Hall practice: double dipping.

More than 100 retirees besides Jensen have taken second jobs with the city after retiring — a practice prohibited by law until 1994.

Now double dipping is seen as a way for city officials to save money in their annual operating budget, even though the practice also aggravates long-term funding problems in its employee pension system.

That's one of the reasons Stothert wants to wean the city off double dipping, despite her plans with Jensen.

“We should do as much as we can to phase out rehiring people that have already retired,” she said.

The practice of double dipping is an outgrowth of a city pension system that allows Omaha employees to retire 15 to 20 years earlier than most folks in the private sector.

Civilian employees in Omaha can retire as early as 50 with a pension based on years of service. Police officers and firefighters can retire as young as 45 with a pension worth up to 75 percent of salary.

The average age of the 52 civilian pensioners who are double dipping is 57; for police, the average age is about 51.

Though city code used to prohibit retirees from returning to city jobs, now it's allowed in most cases, and even encouraged in some.

One example of how much the policy has changed is the Deferred Retirement Option Program (DROP), which was added to the most recent police and fire contracts. The program entices employees to stay on the force full time after officially retiring. So far 28 police officers have entered DROP, which withholds pension payments while retirees continue to work, then pays out a lump sum when they leave city employment for good.

Beyond DROP and Jensen's contractual arrangement, city retirees are limited to working an average of 32 hours a week, or 1,664 hours a year.

Most retirees don't come back to a big paycheck: They work part time, shelving books at the library, helping out on payroll, processing parking tickets.

But a few retirees have returned to leadership roles, receiving healthy pay even as part-timers.

In December, interim Finance Director Al Herink will mark his eighth year of retirement. By the end of August he had received more than $75,000 in his part-time role, on top of $45,842 in pension payments.

Jensen, whose contract is on the City Council agenda for Tuesday, would be a contractor, so he wouldn't have to follow rules limiting hours or pay scale for rehired city retirees.

Such an arrangement is rare. City officials couldn't name any other retirees working on a contract of this size and scope. But Stothert said it made sense for Jensen, an experienced leader who volunteered to help overhaul the department.

Stothert said she doesn't like the idea of hiring back retirees in most cases, though she doesn't plan to tighten restrictions on double dipping. Instead, her administration will, as a matter of practice, refrain from rehiring retirees, she said.

In 1979 the city set a hard and fast rule: Anyone receiving a city pension couldn't be rehired.

That changed in 1994 when the City Council added an exception for retired police officers. The idea was to have them perform clerical duties and other tasks, freeing up detectives for street work.

Three years later, after seeing savings in the Police Department's operating budget, the council expanded the program to include all city employees.

Further changes restricted how much retirees could be paid and stipulated that only one-fifth of available part-time positions could be filled by retirees.

Double dipping peaked under then-Mayor Mike Fahey. When he took office in 2001, 62 retirees were working part time. By the time he left office in 2009, there were 135.

“In many cases during the Fahey administration it made sense for retired city employees to come back part time,” said Carol Ebdon, Fahey's finance director and now an associate professor in the University of Nebraska at Omaha's School of Public Administration. “And it made sense to the city financially, too.”

New benefit costs for retirees are minimal, she said. As opposed to full-time employees, part-timers don't get a pension, so the city has no matching costs to pay into the pension fund. The city also isn't responsible for part-timers' health insurance.

That means the cost to fill a position with a retiree is the salary alone. And rehiring experienced pensioners helps retain institutional memory within a department, Ebdon said.

Jensen himself leaned on part-time retirees while serving as Fahey's planning director. In that case, he said, it prevented a mass exodus of managers due to retire all at once.

“I would have lost probably two-thirds of the upper-level management of the department all at one time,” Jensen said. “That was just too big a blow. We would have done nothing but fill positions for the next couple of years.”

But there are drawbacks, said Kevin Brown, president of City Employees Local 251, the city's largest union of civilian employees.

When retirees are brought back — especially to fill high-level roles — it limits advancement opportunities for other employees. That can lower morale, he said.

It's also a hit to the pension system, which requires a steady inflow of money from active employees. By definition, retirees no longer pay into the pension system.

Omaha's civilian pension is only 51 percent funded and more than $200 million in the hole. The police and fire pension is 44 percent funded, with an unfunded liability of more than $619 million.

Ratings agencies cited Omaha's pension problems in lowering its bond rating, which can make it more expensive to borrow money.

And none of the options available to shore up the pension funds is easy: reducing benefits for future retirees; raising the retirement age; increasing the amount being paid into the system.

By hiring part-timers, the city is reducing the number of people paying into the system, while retirements hold steady.

“Less people paying in, more people collecting — it's just common mathematical sense,” said labor leader Brown.

Some have pensions put on hold

Omaha police officers and firefighters eligible to retire can instead enroll in the Deferred Retirement Option Program, or DROP.

Under the program, employees start accruing pension payments, but the money is paid into a holding account that can't be accessed until they actually retire.

They continue collecting a paycheck and continue paying into the pension system. They receive the accumulated pension money as a lump-sum payment when they leave city employment for good. Proponents call DROP a revenue-neutral way to retain talent.

“Rather than retiring and walking away from the pension system, they stay and continue to pay into it,” said John Wells, president of the Police Officers Association.

Mayor Jean Stothert indicated that the DROP program would be evaluated during upcoming police union negotiations.

She said DROP might not be needed if police agree to extend the minimum retirement age.

“I think it should be phased out, to tell you the truth,” she said.

The union already agreed, during the last round of negotiations, to raise the minimum retirement age for new hires to 55.

So far, 28 police officers have enrolled in DROP.

Correction: Interim City of Omaha Finance Director has been paid $75,058.30 for part-time work through August and also collected $45,842 in pension payments in that period. An earlier version of this story misstated the pension information.

Contact the writer: Matt Wynn    |   402-444-3144    |  

Matt does document- and data-driven stories and builds things for the Web that leverage both.

Contact the writer: Cody Winchester    |   402-444-1216    |  

Cody Winchester is a metro-area watchdog reporter. He covers Douglas and Sarpy Counties.

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