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Originally published Saturday, June 26, 2010 at 10:02 PM

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Retired, then rehired: How college workers use loophole to boost pay

A Seattle Times investigation has found that at least 40 university or community-college employees in Washington retired and were rehired within weeks, often returning to the same job without the position ever being advertised. That has allowed them to double dip by collecting both a salary and a pension.

Seattle Times staff reporters

PULLMAN — Greg Royer ranks among the state's top-paid employees, with a salary of $304,000. But that's just part of his income. For nearly seven years, he's also collected an annual pension of $105,000.

Royer, the vice president for business and finance at Washington State University, tops a long list of college administrative staff members who've been able to boost their incomes by up to 60 percent by exploiting a loophole in state retirement laws.

A Seattle Times investigation has found that at least 40 university or community-college employees retired and were rehired within weeks, often returning to the same job without the position ever being advertised. That has allowed them to double dip by collecting both a salary and a pension.

The pattern of quickie retirements has continued despite the Legislature's efforts to crack down.

A Times analysis of state payroll and retirement records shows that, as of the beginning of this year, about 2,000 people were collecting both wages and a pension from the state. In about two-thirds of those cases, however, retirees had returned to a state job on a part-time or on-call basis.

The Times found that 58 workers — including the 40 in higher education — had retired and been rehired full-time within three months. WSU and the University of Washington together accounted for 30 of those cases. A number of state agencies, most notably the Washington State Patrol, accounted for the cases outside of higher education.

At WSU, Royer, 61, has collected about $700,000 in retirement benefits while continuing to draw his salary. In recent years, he's been responsible for overseeing some of the deepest budget cuts in the university's history. Last year, for instance, WSU announced it was cutting about 360 jobs, axing its theater and dance program and hiking tuition by 14 percent.

Indeed, these college administrative employees are benefiting at a time when state higher-education funding is being slashed. And most have been receiving money from a pension plan that's underfunded by some $4 billion — a shortfall that leaves every state taxpayer on the hook.

While the double dipping raises ethical questions, it typically falls within the boundaries of state law. In some cases, however, The Times found that institutions flouted or ignored the rules altogether that prohibit them from promising employees they'll get their jobs back if they retire.

The trend has sometimes been set by those at the top. Royer's retire-rehire was approved by then-President Lane Rawlins.

At Green River Community College, President Rich Rutkowski, 67, retired for a month in 2001 in a move approved by the college's trustees. That enables him to collect $64,000 a year in retirement benefits on top of his $179,000 salary. Under his watch, three other staffers also have each retired for a month and then been rehired.

Some have been double dipping for more than a decade. At The Evergreen State College, Al Saari retired for a month in 1999. He now collects a salary of $78,000 and a pension of $39,000.

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"I take it a day at a time," said the 80-year-old project manager. "I'll stay as long as I'm needed by the college, and I'm productive, and I feel good."

The quickie retirements were troubling enough to WSU President Elson Floyd that after The Times began investigating, he directed senior staff to end the practice of hiring people back without an open job search.

And Royer, who made front-page news 18 months ago after getting into a physical altercation with then-Provost Steven Hoch, told his superiors recently that he will leave WSU this week, several months earlier than he'd previously planned.

Royer declined repeated requests to be interviewed for this story.

Trail of e-mails

E-mails and other public records collected by The Times help illuminate how Royer and his deputy Rich Heath — who collects a salary of $170,000 plus retirement benefits of $56,000 after retiring from the state Attorney General's Office in 2001 — handled one employee's retirement and return to work.

Those e-mails also show how WSU danced around the rule that prohibits assuring employees they'll get a job back after they leave.

In 2006, Chris Tapfer, WSU's emergency-management coordinator, e-mailed a few colleagues to tell them he was retiring: "This doesn't mean I am ready to hang things up and head for the rocking chair," he wrote to one. "I am hoping that Rich and Greg will find my skills and abilities still useful to WSU and following the required procedures, want to bring me back to work."

In another e-mail, he said he'd "made Rich aware of my availability if he wanted to have me hired back for the position after the appropriate waiting period."

During the early days of his retirement, Tapfer continued to answer work e-mails and inquiries for assistance, asking that colleagues "keep things official" by putting their names to any of his responses they might use.

Tapfer's job was never advertised. Two weeks after Tapfer retired, Heath wrote an e-mail to his boss, Royer, asking for permission to rehire him.

"His retirement has created a void in emergency management that cannot effectively be filled by anyone other than Chris," Heath wrote. "As a result, I would like to hire him to fill the position he vacated."

Eight minutes later, Royer responded: "Yes. You have my permission."

After five weeks, the circle was complete. Tapfer was back working his old job. He'd even been given a pay raise, records show. But the real income boost came from his pension.

When Tapfer told colleagues he'd returned to work, one noted that he'd been gone a few days longer than the minimum retirement period of one month.

"What took so long? Today is the 6th?" the colleague wrote Tapfer.

Tapfer responded: "It was just too hard to give up all that lounging around and goofing off. I needed a few extra days to learn to get out of bed in the morning and get going again. Glad to be back and working with you again."

In an interview, Tapfer, 58, who collects a salary of $70,000 and a pension of $36,000, said he had "no inkling" that he might get rehired at the time he left WSU.

"I'm an ordinary guy who is working for a living. I put in a lot of years, and you're making out like I'm doing something wrong," he said. "If you want to criticize the system, fine, but don't criticize the individual."

Tapfer, who has worked at WSU for 35 years, sits alone in an office that's surrounded by empty cubicles. A clock above the cubicles is frozen in time, the small hand on the 5, the big hand on the 12. This used to be a much livelier place, but all the other workers are gone now — consolidated into other departments or laid off — victims of the relentless budget cuts.

Shifting pension rules

Washington's retirement system was never supposed to work like this.

The way the state system was set up in 1947 left almost no margin for double dipping. State employees could retire and claim regular pension benefits only at age 60 or after 35 years of service. By age 65, all state employees were compelled to retire.

The system has changed many times since then. Compulsory-retirement ages were abandoned for most jobs, and rules were put in place to try to prevent double dipping.

Those rules were temporarily lifted in 2001 to encourage more teachers to return to work to relieve a shortage. That led to a flood of state employees retiring and getting rehired, prompting lawmakers to again clamp down on the practice in 2003. Olympia has been trying to plug loopholes since.

As a result, most state employees can return to work for only up to 40 percent of the hours they worked as full-timers — or lose some of their pension benefits. But thanks to a glaring loophole, many higher-education employees have been able to skirt the rules.

It's because colleges and universities typically have two parallel retirement systems — the state system and a separate system administered by the institution. Administrative employees can often retire under the state system and return to work under the university plan.

By switching plans, the workers put themselves beyond the reach of state limitations on double dipping. In the eyes of the state, it's as if the workers returned to a job in the private sector. In reality, the only thing that has changed is some paperwork.

The returning workers are also able to benefit from a second retirement plan, typically receiving a generous state match of up to 10 percent of their wages.

"Under current law, an individual who opts into one of the higher-education retirement plans has no restriction on the hours they can work," said Dave Nelsen, the legal-services manager for the state Department of Retirement Systems.

Nelsen said it may be hard to find a legislative fix that would withstand a court challenge.

Rep. Steve Conway, D-Tacoma, the vice chair of the Legislature's Select Committee on Pension Policy, said when The Times contacted him it was the first he'd heard of the higher-ed loophole, and he would now look into it. He said only on rare occasions in which there was a genuine shortage of skilled labor was it acceptable to re-employ a retired worker.

"It's not designed to let people make excessive salaries in the last years of their employment," he said. "If there's an abuse here, we need to correct it."

The people contacted for this story offered a variety of justifications for double dipping. Some said they were not paid adequately to begin with. Others said they saw no ethical problem so long as they stayed within legal boundaries.

A number pointed out that after 30 years of work, they had maximized their potential pension payout and would be "losing money" by continuing to make their small contributions to the pension system.

However, almost all employees enrolled in the system stand to gain far more back in pension payouts than they ever contribute through paycheck deductions. Most people will receive back their lifetime contributions and then some within three years of retirement, according to a Times analysis.

Besides higher education, there are other exceptions to double-dipping rules. Police officers and firefighters, for example, can retire and then return to work full time for the state in a different kind of job.

Insider deals prohibited

State pension laws make it clear that any kind of prearrangement — either verbal or written — to rehire a retiring worker can nullify that employee's right to collect his or her pension.

"If a person had an agreement or a contract to be hired back, then it's not a valid separation, and they're not a valid retiree," said Nelsen.

But The Times interviewed several people who, unaware of that rule, said their supervisors promised them their jobs back before they retired.

Noele Cooper, an administrative assistant at WSU, retired for a month in 2003. She said her bosses at the time, Dean Michael Tate and Associate Dean Linda Fox, helped arrange the whole thing.

"I was not in a financial position to actually retire," said Cooper, 66. "I trusted Dean Tate to give me his word. I had to say I would come back for a certain number of years. I told him I'd work at least another five years."

Soon after she retired, Cooper said, she got a call from Fox: Was she ready to come back to work?

Tate did not return calls from The Times. Fox said she didn't recall the details, but did remember that Tate had offered Cooper her old job. Cooper now collects a salary of $57,000 and a pension of $25,000.

At Green River Community College, administrative assistant Shirley Benson, who collects a salary of $71,000 and a pension of $27,000, retired for six weeks in 2001. She said she was promised her job back before she left.

"It was stated that if I wanted to come back," she said, "they would hire me for a year and see how it went from there."

That promise came from her boss, Debbie Knipschield, according to Benson. A year after Benson retired, Knipschield also went through the process, and now collects a salary of $83,000 plus a pension of $45,000.

Rutkowski, the college president, said that while he'd been responsible for rehiring Benson, Knipschield and another retiree, he never made them any promises. He added that he saw no reason to advertise any of their jobs when they left.

"You cannot find a better person in any one of those occupations in the state of Washington," he said. "You couldn't then and you can't now."

Rutkowski said his own decision to go through the process was financial.

"I had served 30 years and consequently was entitled to the pension," he said. "And as far as the college was concerned, they needed a president."

"I don't think there are any ethical issues involved, regardless of the fact that it doesn't feel good for many people," he said. "I could have gone to any other community college and stepped in and taken over, and at a much higher salary, to tell you the truth."

Rutkowski has announced he'll leave Green River this week after more than 38 years. Gov. Chris Gregoire recently declared June 11 "Richard Rutkowski Day" in honor of his service.

As this story was being reported, WSU's position shifted.

In March, university spokesman Darin Watkins said that retire-rehire "is a good deal for us because we end up retaining their services."

"It's no secret that when an executive leaves, you have to pay more money to bring in another executive," he said. "From the university's position, we are saving money by rehiring."

Later, Watkins said the practice occurred only under previous WSU presidents — a position he amended based on the facts.

Then, in April, President Floyd sent a message to university managers: "It recently has come to my attention that in the past, WSU has engaged in a practice of directly rehiring certain individuals who have retired ... "

"While this practice is permitted within state law, it is not a practice that I believe to be in the best interest of the institution ... Effective immediately, WSU will cease the practice of directly rehiring WSU retirees full-time into the same or similar position, without an open and competitive search for the position."

In an interview, Floyd said that once people retire, they should go. From now on, he said, all jobs will be opened up for anyone who might want to apply.

Meanwhile, this year WSU has been trying to balance the budget by offering long-term employees an incentive of more than $23,000 to retire — and leave the building.

Nick Perry: 206-515-5639 or nperry@seattletimes.com; Justin Mayo: 206-464-3669 or jmayo@seattletimes.com

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