State retirement officials have ordered the city of DuPont to pay a total of $600,000 for incorrectly classifying three former city employees as independent contractors.
An audit released Friday by the state Department of Retirement Systems found that Fire Chief Greg Hull, who resigned effective Friday, wrongly received retirement pension payments while under contract to run the south Pierce County city’s Fire Department. The state held the city liable for the payments because it did not report accurate information to the state-run pension system.
Officials said the amount connected to Hull totaled $555,000.
The audit also ordered the city to make contributions owed to the system from two other employees: the former museum coordinator and former police chief. Officials said that amount totaled $45,000. It found the two individuals and city should have paid into the system but had not because officials classified them as contractors instead of employees.
The city disputes the findings, stating in the formal audit response that it “demonstrated that the three employees have been properly classified as independent contractors.” Mayor Michael Grayum told The News Tribune earlier this week that he was told city staff checked with the state agency before bringing Hull aboard more than three years ago and that no red flags were raised at that time.
DuPont officials did not return phone messages seeking comment Friday. State officials say the city can appeal the decision.
The bill is equal to about 9 percent of the city’s general operating budget of $6.7 million this year.
The bill could have been higher, but the state could only recoup overpayments made three years from the date of discovery of Hull’s overpayments, officials said. Hull was hired by the city as an independent contractor in January 2010.
The bill is the latest fallout from a series by The Associated Press in April about public pensions that led the state agency to review DuPont’s use of independent contractors.
The AP story reported that Hull’s status as a contract fire chief allowed him to continue receiving retirement pay while he was being paid a salary by DuPont. His total annual compensation: more than $300,000 a year, including $184,000 from his pension.
Hull, who earned his pension after a 40-year career with the Lakewood fire district, was notified by the state agency May 20 that it was stopping his monthly pension payments. He said the findings by the state agency jeopardized his retirement. Hull will not receive a pension payment for May but could resume them this month, state officials said.
Retirees paid from the LEOFF-1 pension system, as Hull was, can return to work as independent contractors with no effect on their pensions, but retirement pay can be affected if that same retiree is hired to a LEOFF-1-eligible position and is deemed a city employee.
To determine the status, the state looks at factors such as whether the position is integral to the city’s operation and whether the city had hired others to perform the job.
The audit also found the city rehired a retiree to fill in as finance director without informing the state agency. The agency ordered the city to report the employee’s hours and compensation.