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City on hook for big bucks because of insurance deal

September 25, 2012
The Mining Journal

The city of Marquette may have closed the book on a dark chapter of city politics when it agreed to a settlement with former city manager Gerald Peterson, but it's clear the city's checkbook will remain open for some time to come.

The settlement of a lawsuit in July marked what Marquette Mayor John Kivela referred to as "a dark part of Marquette's past." Here's a brief outline:

Peterson was Marquette's city manager for nine years, prior to leaving the position in July of 2005. He continued to receive benefits from the city until the next summer, when the city commission voted to stop payments to all non-represented, retired middle managers and department heads.

It was a move the commission was forced to make after the revelation that some retirees were entitled to collect fully paid retirement health care benefits for life after only two years of service, regardless of age.

The worst part of this benefit "plan?" It was apparently never formally enacted by city government. According to testimony from a retired city clerk, a change to include city health care in retirement took place in 1983 or 1984, but was never officially adopted by the city commission.

In 1998, the city commission adopted a defined contribution retirement plan on recommendation from Peterson. The plan had a quicker two-year vesting period and portability of benefits should employees leave city jobs.

By adopting this new plan, a "tie bar" between the practice of providing retiree health insurance for city employees drawing a pension was extended to employees eligible for the new plan.

Even though there was apparently no city commission approval, qualified employees could receive full health insurance benefits in retirement regardless of age or years of service.

Peterson's contract stated he was entitled to fringe benefits typically provided to department heads - so he got the benefit.

Following the termination of the benefits in 2006, Peterson and former city employees Michelle Doucette and Reatha Tweedie sued the city.

As part of a July legal settlement, Peterson was reinstated to the city health plan and Marquette paid him an additional $82,500 to cover out-of-pocket health care costs since his benefits had been terminated.

In previous agreements similar to the one reached with Peterson, the city paid Doucette and Tweedie a total of almost $64,000 for out-of-pocket expenses.

But that's just the beginning of the payments. Only now is the full financial scope of this deal coming to light.

City records - obtained by The Mining Journal recently through a Freedom of Information Act request - show that Marquette is on the hook for in excess of $39,000 annually to cover health care costs for the three former employees.

Without even factoring for inflation, the city's oversight - or mistake, or outlandish generosity - could easily cost more than $1.1 million dollars over 30 years.

It's a costly legacy for a program that we don't believe ever should have been allowed to happen.



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