Middletown Board of Education Must Pay Back Pension Fund $3.8 Million, Court Rules

MIDDLETOWN, NJ - The Middletown school district lost a big one in court Thursday: A New Jersey appeals court ruled that a 2007 retirement payout the district offered its teachers was unauthorized. And Middletown taxpayers must pay back the state teachers' pension fund $3.8 million, the court ruled.

According to this decision handed down Thursday morning, the appeals court agreed with an earlier decision from the New Jersey Teachers' Pension and Annuity Fund that in 2007, the Middletown school district improperly offered its employees an unauthorized early retirement incentive. The retirement incentive was approved by the Middletown school board.

"The Board of Education will review the court's decision and decide a course of action in the near future," school superintendent Dr. Bill George told Patch Thursday, when asked about the court's ruling. Dr. George was not superintendent in 2007.

At an Oct. 22, 2007 meeting, the Middletown Board of Education approved a "Sidebar Agreement" with its teachers' union. That agreement provided:

• Tenured teachers who retired or resigned prior to June 30, 2008 $225 for each unused sick day, up to a maximum of $40,000.
• Non-certified union members $125 per sick day, up to a maximum of $20,000.

However, the very next day the state Division of Pensions and Benefits' began reviewing the legality of the agreement. By Aug. 1 the state determined the benefits package was not valid, as it had not been authorized by the state and was not supported by any existing pension laws. The state also demanded Middletown pay all the retirement packages back. In total, 41 former Middletown school employees — a mix of teachers and office personnel — took advantage of the unauthorized retirement payouts. The pension division calculated $5,429,900 in improper payouts, and invoiced the Middletown Board of Education for that amount.

Not surprisingly, the school district disagreed and appealed the decision to the Teachers' Pension and Annuity Fund Board of Trustees (TPFA).

In 2014, the TPFA affirmed the Pension Division's ruling that the retirement payout was illegal, but reduced the assessment to $3,815,600 and allowed the Board to pay that amount over a five-year period at no interest. It was this most recent decision that the Middletown school board appealed and lost in court Thursday. The appeals court ruled that not only did Middletown improperly offer the retirement package, it also implemented the payouts even after receiving a letter from the state, stating approval was required before payouts could be implemented.

"I was not on the Middletown School Board in 2007 but this was brought to our Board's attention in 2014," Board of Education president James Cody told Patch Thursday. "We have been looking into this illegal early retirement incentive from 2007 for a while and fighting it."

Current Board member Joan Minnuies and incoming member Leonora Caminiti were both members of the Middletown Board of Education when the incentive was voted in.

The appeals court ruling was first reported by John Paff on his government watchdog blog.

Photo: Middletown High School North exterior, Public Domain, https://en.wikipedia.org/w/ind...