Milwaukee County is implementing a low-tech solution to a high-tech - and potentially expensive - glitch to avoid a repeat of last week's mistaken issuance of an extra monthly pension check to thousands of Milwaukee County retirees.
The fix: A real person instead of a computer must authorize the payments.
"That's verbal approval, an actual phone call," said county retirement system director Gerry Schroeder. "We will say 'yes' or 'no.' It's no longer sending a code."
The county's 7,200 retirees last week got a surprise extra pension payment, just a few days after regular January pension checks had been credited to the retirees' bank accounts. The county, its retirement system computer vendor and Wells Fargo bank are investigating exactly what went wrong. According to county officials, it boiled down to someone at Wells Fargo overriding a security password during a routine test of the pension payment system.
"We want a final step to be a human being authorizing" any pension payments, Schroeder said. "The human process in an electronic age. It's a final catch."
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In addition, the county will check to ensure that money to cover any pension payout has been received by Wells Fargo, Schroeder said. That didn't happen last week when the bogus payments were authorized.
Wells Fargo spokesman Jim Seitz said the bank "took immediate action" when it learned of the mistaken payments and had determined the cause of the problem. He declined to elaborate, citing client confidentiality.
More than 98 percent of the $10 million in payments have been recovered through reversals by Wells Fargo, Schroeder said. Wells Fargo also is taking the lead in pursuing repayment of the remaining mistaken payments now lodged in other bank accounts or converted to cash, said David Arena, the county's employee benefits manager.
For anyone who still hasn't relinquished the undeserved extra payment, the remaining sum will be deducted from the next regular pension check at the end of this month, Arena said. County taxpayers and the Pension Board will not be out any money, he said.
Wells Fargo electronically routes pension payments to retirees' designated bank accounts. Vitech Systems Group maintains the county's $10 million computerized pension system launched about a year ago.
A detailed report on reasons the extra pension payment happened will be completed in about two weeks, Schroeder said.
About 100 retirees Wednesday morning at the county's annual Pension Board meeting were told the pension fund gained about 19 percent in 2009, finishing the year at nearly $1.8 billion. That figure includes nearly $400 million in borrowed money. In 2008, the fund lost 22.4 percent, some $500 million, in the stock market decline.
Last March's $400 million pension obligation bond issue to bolster the county fund came at a crucial time, said Larry Langer, a financial consultant to the county. The county is paying about 6.2 percent in interest on the bonds and hopes to do better than that in investment earnings.
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The borrowed money "helped secure the benefits of the retirement system a little bit," Langer said.
In response to a retiree question about the fate of pension funds if the county ever were to be dissolved or reorganized, assistant county corporation counsel Mark Grady said individuals' pensions were safe.
"If the county were completely abolished, your benefits are completely protected," Grady said.
County Executive Scott Walker has suggested dissolving the county and parceling out its functions to other governmental units.
Copyright (c) 2010, Milwaukee Journal Sentinel/Distributed by McClatchy-Tribune Information Services.
