Federal Way’s chief of staff seeks to collect state pension, despite state denials

Published 4:45 pm Thursday, November 12, 2015

The highest paid employee in the city of Federal Way is seeking to collect a full retirement in addition to his salary, even though state officials twice deemed him ineligible for benefits and claimed he was not really retired.

Officials with the state Department of Retirement Systems said Chief of Staff Brian Wilson did not completely separate from employment when he retired from the police department on Jan. 15, 2014, as he had a prior agreement with the city to begin his position as chief of staff five days later, according to public records the Mirror obtained.

But Wilson’s attorney disagrees.

“While there may have been a plan [for the chief of staff position] in a loose sense, he still separated from service entirely from the city and there was a period of days before he was extended a position of employment,” Robert L. Christie, with Christie Law Group PLLC, told the Mirror on Wilson’s behalf, who declined to comment on the matter. “There was no hidden agenda — this is completely straightforward and [his retirement] was done exactly the way the Department of Retirement Systems prescribed.”

Wilson, who served as a police officer for nearly 34 years, began as the city’s chief of staff on Jan. 20, 2014 and earns an annual salary of $147,888. He also collects an additional $19,620 per year in deferred compensation as he was ineligible for a Public Employees’ Retirement System contribution, and the city contributes $500 per month towards his 401(a) retirement plan.

Since he retired as police chief on Jan. 15, 2014 and began his new position, he has sought to collect approximately $82,524 per year in retirement benefits from the state Department of Retirement Systems as a member of the Law Enforcement Officers’ and Firefighters’ Retirement System (LEOFF) Plan 2. The department has denied his claims for benefits twice, and the second step of his second appeal is currently before an administrative law judge, with a hearing set for this January.

In her initial Feb. 21, 2014 denial letter, Alexandra Kasuske, LEOFF plan administrator, outlined the key factors in Wilson’s case that led to her decision.

On Dec. 19, 2013, then-city attorney Patricia Richards outlined Wilson’s retirement as police chief, effective Jan. 15, 2014, and his acceptance of the new chief of staff position. Richards’s email detailed Wilson’s new salary, vehicle allowance, deferred compensation and explained his sick leave balance and vacation accrual would be reinstated in his new role.

The city then issued a press release on Dec. 23, 2013 regarding the mayor’s new management structure. The Mirror subsequently reported on the same day that the mayor-elect moved Wilson to a new position as chief of staff.

“I’m honored and privileged to be asked by [the mayor-elect] to be his chief of staff,” Wilson said in the article. “I look forward to assisting him with the management and leadership of operations, initiatives and projects within the city.”

Wilson notified Mayor Jim Ferrell and city staff of his resignation on Jan. 6, 2014. Human Resources manager Jean Stanley then sent an email to city staff on Jan. 15, 2014, requesting to deactivate Wilson from all systems as he had retired from the city. On the same day, Stanley also filled out an employee separation checklist, indicating that Wilson turned in his keys and equipment, and outlining when his health coverage and other benefits would cease.

The next day, the city held a retirement ceremony, before rehiring him as chief of staff four days later.

Kasuske also defined what it means to fully separate from service, including completing the necessary actions of leaving employment, such as returning all employer-issued items.

“It entails actually turning in the key, going away, having the party, eating the cake — all that kind of stuff that normally happens when somebody goes away,” said David Nelsen, assistant director for customer and policy services for the state Department of Retirement Systems. “But it also means that there can’t be any sort of agreements or understandings that they’re going to come back and work for that same employer before they actually leave. Because then, specifically the IRS, tends to look at that circumstance as … you’re just taking time off without pay; you never really left employment because you knew you were coming back. So they tend to look at that as not a valid separation, which means the person didn’t actually retire.”

He noted these retire-rehire agreements don’t have to be a legal contract.

“In federal guidance, they even go so far as to say there just has to be a reasonable expectation that the individual would be coming back to work for that same employer before they actually terminate,” he said of IRS standards. “So it doesn’t have to be a written contract that’s signed by both parties. It doesn’t even have to be a verbal agreement that would withstand the legal scrutiny of [whether] this is a contractual relationship. It’s a lesser standard than that, according to federal guidance.”

So why should a pensioner truly be retired before being rehired?

“It’s a double-edged thing,” Nelsen said. “There’s taxation legalities at the federal level and policy at the state level. Retirement plans are for retirees.”

In her decision, Kasuske said while Wilson’s case or similar circumstances “are not specifically referenced on our website as an example of non-compliance, it would be reasonable for someone in your circumstances” reading the department’s website “to at least feel some clarification was in order, and contact the department to ensure they were meeting the retirement eligibility rules. We have only one contact on Dec. 23, 2013 where you requested an estimate and a retirement packet.”

She said at no time when Wilson asked for an estimate in December 2013, nor when he submitted his retirement packet in January 2014, did he confirm that having four days off between jobs with the same employer constituted a separation from all employment.

Kasuske concluded that Wilson never severed all employment with the city as required per state law and was, therefore, ineligible to receive retirement benefits.

Second appeal

Wilson appealed Kasuske’s decision to a petition examiner on June 19, 2014.

Christie, his attorney, argued that prior to Ferrell taking office on Jan. 1, 2014, he did negotiate Wilson’s resignation and rehiring. However, Ferrell lacked any legal authority to bind the city, Christie said in the documents.

He said Stanley also spoke with a Department of Retirement Systems employer, who informed her that as long as the city terminated Wilson from all employment with the city and followed all normal termination processes that he could be hired the next day as chief of staff. The records did not indicate who the state employer was that Stanley spoke with.

The city and Wilson relied on that advice when they went through the process to separate him from employment.

“He was fully separated in every sense of the word,” Christie told the Mirror.

He noted while there “may have been an expectation” that Wilson would be rehired, the mayor lacked the legal authority to hire him as chief of staff because he wasn’t in office yet, Christie said.

“Certainly there was talk, but that’s quite different than action taken, which a mayor-elect can’t do” he told the Mirror.

Therefore, Kasuske’s reliance on the article “overlooks basic principles of contract and agency law that require a person negotiating a contract to have authority to make an offer,” according to Christie. Furthermore, “put simply, the ongoing negotiations were precisely that — unenforceable as a matter of law — and [Kasuske] has no standing to construe the contract otherwise.”

He countered Kasuske’s conclusion that Wilson should have contacted the department to ensure the city was meeting the retirement eligibility rules, saying she “misunderstands the facts.” Wilson and the city did seek clarification from the department, when Stanley spoke with a LEOFF specialist in December 2013, he noted.

“Mr. Wilson did not simply take a leave of absence and return,” Christie said. “Rather, he followed the letter and the spirit of the advice issued by the Department of Retirement Systems.”

He also expressed his frustration regarding the department’s seeming lack of rules or regulations that detail exactly what an employee needs to do to separate from employment.

“If they have some rule book that should be followed by Wilson or anyone else out there, let’s see it. That just seems fundamentally fair,” he said.

Ferrell said in a statement to the Mirror he “fully supports my chief of staff and his due process regarding this matter.”

He said he expressed his desire to appoint Wilson as chief of staff on Dec. 19, 2013 during a meeting with him. He also notified city staff of his intention to appoint Wilson as chief of staff effective Jan. 20, 2014.

When asked if he knew the city would rehire Wilson as chief of staff when the city disseminated the Dec. 23, 2013 press release, he said, “My intention was to appoint him as chief of staff on Jan. 20, 2014.”

Ferrell submitted a declaration to the state in support of Wilson’s retirement benefits. He determined in mid-December 2013 — after conversations with Wilson and all of his department directors regarding city issues — that he would need a position to assist him with operational issues, and asked staff to begin drafting a position description for chief of staff. When it was clear that Wilson would not continue as police chief, Ferrell negotiated his employment with the city as chief of staff.

“I believe it is imperative to note that Brian Wilson served this city with distinction as our police chief and deputy police chief for almost 18 years,” Ferrell said in his statement. “He was an original member of our police department since its inception in 1996. He served as a commissioned police officer for nearly 34 years in the LEOFF retirement system. He retired from that law enforcement career and I am proud to have him as my chief of staff.”

Christie also praised Wilson’s work.

“Bottom line is, Mr. Wilson worked hard and honorably” during his law enforcement career and “played by all the rules — period.”

Second denial

Jacob White, an attorney with the Department of Retirement Systems, ultimately upheld Kasuske’s decision.

“Mr. Christie contends that an offer of employment, an acceptance of employment and the start of the chief of staff position all happened after Mr. Wilson’s last day as the police chief,” White said in his Dec. 29, 2014 petition decision.

He said Christie’s timeline “runs contrary to the evidence, which shows that Mr. Wilson had been offered and accepted the position as chief of staff prior to separating from his position as police chief.” He added while Wilson and the city “went through the ceremonial motions of separating his employment,” the agreement for Wilson to immediately return as chief of staff “had already been communicated not only internally but to the public. Therefore, Mr. Wilson did not separate from all employment with his employer as required by [state law].”

If the administrative law judge rules in the state’s favor again this January, Wilson can file the case in superior court as the final step in the appeal process, Nelsen said. However, Christie said he would not speculate what may happen.

“We look forward to a fair hearing and just outcome.”

Retire-rehire

State lawmakers have strengthened laws regarding retire-rehire deals in recent years to prevent retirees from so-called double-dipping when they are rehired in similar government jobs. However, the retire-rehire law does not apply to LEOFF Plan 2 members.

Those members, per state law, can begin a career in another public employment position outside of law enforcement or firefighting. The Legislature passed the career change bill specifically for these members in 2005 so retired law enforcement or firefighters, who age out of these positions before they are ready to leave the workforce, can start a second career in non-LEOFF public employment, according to the LEOFF Plan 2 Retirement Board.

The provisions of the career change legislation allow retirees who start a new career in public employment other than as a law enforcement officer or firefighter to either establish retirement membership in a new public retirement system and suspend their LEOFF pension, or opt out of the second public retirement systems and continue to receive their LEOFF pension while pursuing their second career. Wilson opted out of Public Employees’ Retirement System so he could continue to receive his LEOFF benefits.

Because he was ineligible for the Public Employees’ Retirement System, as he chose to receive his LEOFF pension instead, the city gave him deferred compensation. Wilson collects $19,620 per year in deferred compensation — a state supplemental retirement savings program, according to Ade’ Ariwoola, the city’s finance director. Ariwoola noted Wilson is currently the only city employee who opted out of the Public Employees’ Retirement System.

In 2014, the city contributed $9,724 and Wilson contributed $7,776 into the account, Ariwoola said.

Nelsen said while the Department of Retirement systems administers the Public Employees’ Retirement System, deferred compensation is a voluntary plan administered by the employer and separate from a pension law.