The University of Alabama did make retirement contributions as part of a harassment settlement with a former employee, a Retirement Systems of Alabama official confirmed last Monday after weeks of cagey responses to questions about the matter. Undetected, such payments had the potential to increase for decades that individual’s benefits beyond what she otherwise would have earned.
RSA Deputy Director Don Yancey said this week that UA did, in fact, make retirement contributions in an April payment to former employee Leslie Abernathy, a question Lagniappe has asked both the UA System Office and RSA since June. Neither entity would specifically answer the question until last week.
Attempting to make retirement contributions for someone who no longer works with a member organization, or as part of a legal settlement is a violation of RSA policy. Purposeful attempts to increase an employee’s retirement benefits via increases in payroll or time in service before they leave employment are known in the retirement industry as “spiking.”
Details of the settlement crafted by university attorneys and Abernathy’s lawyer Will Beckham have not been made available, but both Beckham and the university have confirmed there was indeed a settlement between the parties. Abernathy, who worked in the university’s Development Department before leaving in March, received a lump sum payment of $83,333.43 in April, along with another payment equal to her regular monthly salary of $8,025.56. However, the larger payment was coded in online records as “service and professional fees,” while the other was listed as payroll. Since then, Abernathy has received three payroll payments of $10,416.67 apiece in May, June and July.
Yancey said Abernathy’s April payroll payment did include retirement contributions, but they were returned once RSA became aware they were part of a legal settlement. The RSA was alerted to Abernathy’s settlement in June when Lagniappe endeavored to discover whether increased retirement benefits had played a role in her settlement agreement.
“In her case, if they had left her at her regular salary and continued to pay her, we probably would not ever know that they did that,” Yancey said. “The bottom line is they did inflate her salary a little bit, not a huge amount.”
He downplayed the significance of UA officials signing off on a settlement that could have potentially saddled the RSA with unearned benefits paid to Abernathy for decades. Yancey claimed the increase in Abernathy’s payroll disbursements from $8,025.56 a month to $10,416.67 a month would have been spotted by the RSA, which would have triggered inquiries.
“That would be one of those situations that would raise a red flag for us. In fact, we did contact the university. They were very up front and said basically it was a settlement, and they apologized and we told them to quit sending money in and we sent back the one month I think they sent in that triggered that. So that was fairly quickly resolved,” he said.
While Yancey indicated the rejection of retirement contributions made on Abernathy’s behalf was triggered by her salary increase, media attention appears more likely to have put the settlement on RSA’s radar.
Lagniappe’s first email conversations with RSA about Abernathy took place on June 9 with then-General Counsel Leura Canary, who asked for the name of the person behind Lagniappe’s inquiries.
“I can and will look into the matter if you provide RSA with the name(s) of the former employee(s),” she wrote June 9.
On June 15, in response to subsequent questions, Canary wrote there had been no contributions on April’s “lump sum” payment of $83,833.34, which was not the question being asked. By that time, the $8,025.56 April payroll disbursement had been made, as well as the first $10,416 payment, which took place May 28, according to UA records.
Canary sidestepped commenting on the April payroll payment, which Yancey now says did include a retirement contribution, and claimed RSA couldn’t yet determine if that had happened with the “latest” payment on May 28.
“There were no contributions submitted to RSA on the lump sum payment made to Ms. Abernathy in April. It will be at least a couple of weeks before we know whether contributions were made on the latest payment to Ms. Abernathy. Please understand that if contributions are made on the payment, we will request information from the employer so that we can determine whether the contributions are appropriate. If they are not, we will refund them,” she wrote. Canary retired from the RSA about a month ago, according to Yancey.
The question of whether Abernathy’s situation is unique, or part of a pattern in which the University of Alabama System uses RSA benefits to help secure settlements with employees is still one neither entity has been willing to discuss candidly. The evasiveness of answers from both sides regarding Abernathy’s settlement lends credence to claims by multiple university sources who say it has become standard practice to include retirement benefits in payments made to certain employees who agree to sign non-disclosure agreements (NDAs). Lagniappe has spoken with former employees who say their post-employment payments as part of severance deals included retirement contributions.
Without the help of the UA System, the RSA or the employees involved, it is difficult to know exactly what additional retirement benefits could be derived from additional payments made through the payroll system, but if they aren’t caught, there is potential for substantial sums to be paid out over many years. Time in service is one of the metrics used by RSA to calculate retirement benefits, as is average salary. An employee getting to the 10-year or 25-year marks would also be critical in terms of what is paid out. Increasing any of those, could increase retirement benefits for individuals who are not above the IRS cap of $290,000 a year.
For instance, Abernathy is listed in payroll records as having started with UA in October of 2012, and she left in March 2021, 18 or 19 months shy of 10 years employment. It is unknown if Abernathy had any previous time in the employment system at another job, but if not, her departure would have left her short of being vested in the system, meaning she would not be eligible for retirement benefits. Neither the RSA nor UA would reveal how much service time she has in the system.
Abernathy’s pay before leaving was roughly $96,000 a year, but her current payroll distributions are at a rate of $125,000 annually.
If the RSA had not been alerted to her settlement, and UA continued making payroll payments to her as if she was still employed, the possibility exists Abernathy could have become vested in the system. On top of that, the increased payment amounts would have raised her average salary and also meant even larger retirement payments she could have started receiving at age 60 or 62 depending upon her status. It is unknown how long the UA intends to continue making monthly payroll payments to Abernathy as part of their settlement agreement.
Yancey expressed certainty that if UA was attempting a retirement spike for Abernathy, it would have been discovered either when she called to ask about her benefits or when she applied for retirement. But he also said the RSA has little choice but to accept what member organizations report to them. So even if RSA did make inquiries into Abernathy’s pay increase, if UA officials didn’t admit to it being part of a settlement, by Yancey’s explanation, RSA would have had no grounds upon which to reject contributions.
“We can go to an employer and ask for things like board minutes, personnel action forms, documentation, but the employer, if they’re going to be doing something like this, they’re more than likely going to have the backup documentation that will make it appear — and I’m not accusing the university of doing this by any stretch — but any employer that’s going to do that is probably going to have the backup documentation that says somebody has a job,” Yancey wrote. “Now whether they require this person to actually show up and do anything or not, that’s between the employer and the employee. Again, we don’t really have any authority beyond making some fairly simple inquiries on that.”
Lagniappe asked University of Alabama Senior Vice Chancellor Sid Trant last week about how Abernathy’s settlement was reached and whether attorneys representing the UA System ever mentioned retirement benefits during negotiations. Trant did not respond. Abernathy’s attorney Will Beckum was also asked if his client’s future retirement status and benefits were discussed during settlement negotiations and, if so, who broached the subject, but he did not respond.
The larger issue at play here is whether the University System has engaged in activities that would have spiked retirement benefits for outgoing employees. As Lagniappe has detailed in several stories, the System has frequently given large bonuses or months of extra payments to administrators who have retired, either by choice or involuntarily. Multiple current and former UA and System Office employees, speaking on the condition of anonymity, have described circumstances in which administrators were pushed from their jobs, only to continue receiving significant payroll disbursements after they left.
Reviews of UA payment records backs up those claims. As Lagniappe has reported, millions of dollars have been spent by the System on unnecessary payments to former employees or to those who stepped down to lower positions but retained their high salaries. Sources have also said it has become common for administrators who are pushed out of their positions to receive severance packages that continue paying them for months in exchange for signing a non-disclosure agreement (NDA).
The System and Board of Trustees have also ignored their own guidelines when it comes to exiting presidents and chancellors, unnecessarily dumping millions in their pockets. Other former presidents and chancellors have also been given lavish post-retirement payments that were not required under the guidelines set by the Board of Trustees’ Compensation Committee.
But this largess isn’t limited to presidents and chancellors. Other high-ranking administrators have also received non-standard deals.
David Franco, former graduate school dean, for example, was paid more than $420,000 over 22 months while he was living in Ohio after retiring in 2016. The System called him a “dean emeritus” and claimed he was helping with recruiting from the Buckeye State. Franco, like the others, received money through the UA payroll system, but officials have refused to say if he or others like him had retirement contributions made on their behalf.
In a July statement acknowledging the settlement with Abernathy, Trant mentioned that such arrangements were not unusual for such a large organization. That too raises questions about whether retirement contributions have become one of the tools the University System uses to hammer out an agreement.
“I will confirm that the university entered into a confidential settlement with Leslie Abernathy in resolution of her separation from employment with UA. In any operation of this magnitude, there will be times when the employer and an employee agree to part ways in a manner that is mutually beneficial to both parties. Negotiating such a separation to include a mutual release of claims and confidentiality for the parties is also very common,” Sid Trant wrote.
How university attorneys with experience in the matter negotiated a settlement that made retirement contributions to Abernathy in violation of RSA rules is something UA officials won’t discuss. For months, the UA System Office also has refused to explain why it chose to make settlement payments or payments to employees no longer working there through payroll or if those payments have included RSA contributions. The UA System Office has also not answered repeated questions about which official signed off on Abernathy’s agreement.
Trant’s July 6 response to questions about Abernathy’s settlement also leapfrogged the RSA rejection of her retirement contributions on her first post-employment payment.
“In Leslie Abernathy’s situation, she and the university reached a mutually beneficial agreement that winds down her employment with the university. While employed, participation in the Teacher’s Retirement System is mandatory. Because her employment has ended, Abernathy is no longer participating in the Teacher’s Retirement System,” Trant wrote.
RSA Deputy Director for Administration Jo Moore also did not address the fact there was an attempt by the UA System to make retirement contributions for someone no longer employed there, saying essentially that no problems existed because they had been taken care of.
“Based upon the information provided by the University of Alabama, RSA reviewed the compensation and creditable service of each individual mentioned in Lagniappe’s article and if there was any issue, RSA addressed it at the time of retirement,” Moore wrote. “Ultimately, the University of Alabama properly certified the compensation of each employee and the correct contributions were paid to RSA. No pension spiking was detected and no settlement payments were accepted.”
In a response to Lagniappe stories, and also in an article she wrote in the RSA’s monthly newsletter “Advisor,” Moore made the statement that “RSA does have safeguards in place to protect its pension system from abuse and these safeguards work.”
But refusal by Moore to describe those safeguards led Lagniappe to file an official public records request on Aug. 20 for any documentation describing the safeguards or policies related to them.
During his Aug. 23 interview, the only safeguard Yancey described was that the RSA computer system would flag a payroll increase of 20 percent or more, and that would lead to the retirement system asking questions of employers. But, he explained that the honesty of member organizations would still be required in order to actually stop spiking. Yancey said if RSA was told by one of its member organizations that an individual was performing a job for them, the retirement system wouldn’t really be in much of a position to refute that.
“It might not be right. It might be unethical,” he said. “I’m just trying to say we’re not really the guys who can help other than providing an explanation.”
He did say RSA can ask for documentation that backs up payments to an individual, or possibly even legally defend a decision to return payments. In Abernathy’s case, a simple apology from UA was enough, though.
Asked why he thought UA would make settlement payments via payroll disbursements if it wasn’t to make it appear like someone was still working for the university, Yancey said he could only guess.
“Unless you’re part of that discussion, you really don’t know why they decided to do it that way,” he said.
As for documentation that would more thoroughly explain the RSA’s safeguards protecting it from spiking, Yancey said that doesn’t really exist.
“We don’t really have any records that would lay out the procedures that we go through. Like I said, we have so many scenarios where things that are done that we might think are abuses,” he said. “It’s really more of a question of something that raises a red flag, and we make inquiries depending on what the circumstances are to try to get what information we need to determine if it’s an appropriate payment for retirement or not.”
Rob Holbert is a co-publisher of Lagniappe Weekly. Email him at firstname.lastname@example.org
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