Denver Health Retirees Ordered To Repay $11 Million In Pension Benefits

DENVER (CBS4) - A CBS4 Investigation has learned that about 40 retirees from the city of Denver -- widows, widowers and their beneficiaries -- have been ordered to repay a total of $11 million in retirement benefits. They have been erroneously receiving the funds for years due to an error by the retirement plan administrator. One employee has been ordered to repay $3 million.

"It's extremely unfortunate for the affected employees," said Heather Darlington, Executive Director of the Denver Employees Retirement Plan, known as DERP, the independent agency that manages retirement benefits for 10,000 retired city of Denver workers.

"We unfortunately paid too much," said Darlington. "It was a DERP administrative error."

According to Darlington, the error in applying IRS codes to retiree benefits occurred about 15 years ago and was only discovered in late 2019 during a routine review. Consequently, letters were sent last month to the 40 Denver Health retirees and their survivors, like Tod Sedbrook, whose wife, Dr. Lynn Sander, worked for Denver Health for 23 years.

She died in 2013, but Sedbrook and his wife received her benefits starting in 2004 following her retirement, and continuing since then. DERP has told Sedbrook he needs to repay $58,762.28.

"Somebody messed up," Sedbrook told CBS4. "I'm actually at a loss here. It's not fair to me what they're doing."

Sedbrook said based on the retirement benefits, he retired from his job in Colorado as a tenured professor, moved and bought a house in North Carolina; all things he said he would not have done had he known DERP miscalculated his benefits for 15 years.

"Why in the world can't they read IRS tables?" asked Sedbrook. "Why can't they read a simple calculation?"

He said he will now likely need to hire a lawyer and an accountant and is leaning toward appealing DERP's attempt to claw back the benefits.

DERP administers retirement, health and disability benefits for 10,000 civilian retirees from the city of Denver, and at the end of 2018, was managing approximately $2 billion in assets.

Darlington said while the overpayments range from $3,000 to $3 million.

"We unfortunately paid too much to a fraction of a percent of our retirees. We are doing the right thing by correcting the error. Any overpayments need to be recouped legally from the individual. It was not the retirees fault."

Jim Shwayder retired from Denver Health in 2007 and says he received a letter from DERP last week, indicating he will have to repay a portion of his benefits.

"I am fully retired and on a fixed income." said Shwayder. "This could be devastating."

He suggested the impacted retirees might band together and file a class action lawsuit against DERP.

"I sense there has been long standing mismanagement or lack of oversight at DERP, that is leading to significant hardship for those who rely on the benefit for their retirement."

From his home in North Carolina, Sedbrook said the prospect of having to repay nearly $60,000 has caused him anguish and worry in the midst of the economic consequences of the COVID-19 pandemic.

"What do I do now?" asked Sedbrook. "It's a painful thing."

He said amid the stress of the pandemic, DERP notified him in mid-April of how they would need to claw back a chunk of his benefits.

"It kind of added insult to injury," Sedbrook told CBS4.

Denver city councilman Kevin Flynn told CBS4 he was surprised at the years-long mistake and said, "I'd like a report on how it happened."

Sedbrook said DERP offered him various options to repay the money including writing a large check, repaying the money over ten years or accepting reduced monthly benefits until the entire sum was repaid.

"But to pay them from 2004," said Sedbrook, "I don't get it."

Denver Health shared the following statement with CBS4 on Tuesday morning:

DERP recently notified Denver Health and a group of DERP members, who are retired and current Denver Health employees, that DERP has discovered an error it made in calculating the retirement benefits of those retirees and employees. The calculation error does not affect all Denver Health members of DERP, only those directly contacted by the retirement plan. DERP is an independent agency over which Denver Health has no control or responsibility. Denver Health has always made the required contribution payments to DERP-on time and in full-on behalf of all employees who have been members of DERP. We are concerned about this issue and the consequences for our retirees and current employees who are affected. We have reached out to DERP's executive team and look forward to working with them in the coming days to understand how the errors occurred and how they should be resolved.  While Denver Health is a third-party to this issue, our hope is that DERP and the retirement plan members who are affected will find a positive solution.