Judges Seek Exemption from Arizona Pension Reform

March 21, 2013 (PLANSPONSOR.com) – Two Arizona judges asked the state senate to exempt judges from pension reform that would leave them with less-generous retirement benefits.

The Republic reports Arizona Supreme Court Chief Justice Rebecca White Berch and Maricopa County Superior Court Presiding Judge Norm Davis urged the Arizona Senate Finance Committee to exempt judges from a bill that would create a 401(k)-style retirement plan for future Arizona elected officials. The legislation, House Bill 2608, seeks to close an Arizona public pension system known as the Elected Officials’ Retirement Plan (EORP).

According to the news report, the EORP was found to be “significantly underfunded and costly to taxpayers” with recent public funds paid into it totaling $21.7 million, while contributions totaled only $6.8 million. The committee is conducting an in-depth study of Arizona pension reform, which is the result of a state senate decision in May 2012 not to immediately close out the EORP (see “Az. Senate Rejects DC Plan for State Officials”).

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The judges asked the committee to let future judges have the option to be in the Arizona State Retirement System (ASRS) that, while not as generous as the EORP, would provide lifetime pension benefits to public employees when they retire. Higher court fees were cited as a way to help subsidize the cost of allowing judges to be in the ASRS. 

The legislation would have new elected officials contribute 8% of their pay into their retirement funds. The employer would contribute an amount equal to 5% of the official’s pay to the retirement fund. That fund would grow or shrink based on market investments, similar to private-sector 401(k) plans. 

Elected officials have been required to pay more for their pensions following changes made in 2011, and they will be paying 13% of their salary toward retirement starting July 1, compared with 7% in 2011, the news report said. Employers’ payments range as high as 36.44%. 

The bill, which could be amended as it heads to the full state senate, would not affect those already retired or those already elected. If passed, it would take effect January 1, 2014.

Former Detroit Pension Fund Trustee Charged for Kickbacks

March 21, 2013 (PLANSPONSOR.com) – Two individuals connected with Detroit pension funds have been charged with participating in a bribery and kickback conspiracy.

The office of United States Attorney Barbara L. McQuade announced Ronald Zajac, general counsel of Detroit’s two pension funds, and Paul Stewart, former trustee of Detroit’s police and fire retirement system are charged with taking part in bribery and kickbacks totaling more than $200 million. Zajac and Stewart were added as defendants in a superseding indictment that had already charged former city Treasurer Jeffrey Beasley and investment sponsor Roy Dixon with the bribery and kickback conspiracy. 

According to the 13-count indictment, between January 2006 and April 2009, Zajac and Stewart conspired with others to defraud current and retired Detroit city employees. Stewart is said to have accepted thousands of dollars in cash, trips, entertainment and other items of value from those seeking investments from the police and fire retirement system. Zajac is said to have solicited and collected cash from those having business before the boards of trustees of the city pension funds. 

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Also during the conspiracy, Zajac sought to curry favor with Beasley and former Mayor Kilpatrick by raising more than $70,000 for the Kilpatrick Civic Fund. Zajac directed and forced people having business before the pension funds to spend thousands of dollars to entertain trustees of both pension funds. Zajac forced one trustee to pay more than $10,000 for limousines for trustees during a trip to New York City.  

Soon after giving Beasley, Stewart, and a third trustee thousands of dollars in cash at their “birthday parties,” the trustees voted to give Zajac a substantial raise as General Counsel of the two pension funds. As a result of the raise, Zajac was receiving over $400,000 in compensation per year from the pension funds.   

Zajac served as the general counsel of Detroit’s two pension funds, the General Retirement System and the Police and Fire Retirement System, from 1982 through 2012. In November 2012, the Board of Trustees of the Police and Fire Retirement System terminated Zajac as general counsel. He still serves as the General Counsel of the General Retirement System.  

Stewart was a City of Detroit police officer for more than 30 years and served as a trustee of the Police and Fire Retirement System from 2004 to 2011. Stewart also served as the vice president of the Detroit Police Officers Association, the union that represents most of Detroit’s police force.  

If convicted, both Zajac and Stewart could face up to 20 years in prison and fines of up to $250,000.

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