A state agency says a Tri-Cities town has been allowing someone who isn’t an official employee of the town to participate in the State of Tennessee’s pension plan.
Turns out – that person happens to be the Unicoi, Tennessee town attorney who has worked for the town for 18 years and who says she doesn’t understand the state’s decision.
Wednesday, the Tennessee Consolidated Retirement System, or TCRS, informed the Town of Unicoi incorrectly allowed Town Attorney Lois Shults-Davis to accrue retirement benefits for four years in the state’s pension program. Shults-Davis bills by the hour and is paid a retainer in exchange for legal services.
“There is no employee-employer relationship between Ms. Shults-Davis and the Town of Unicoi,” the town was informed this week.
Shults-Davis told News Channel 11 she’s a charter member of town government who works at the appointment of the Mayor.
The Town of Unicoi employs seven full-time employees, all of whom are enrolled in the state pension plan. None of the town’s part-time employees get retirement benefits, town recorder Michael Borders confirmed.
Unicoi employees enrolled in TCRS can contribute 5% of their monthly pay toward their pension. The town contributes 8.32%.
Records show Shults-Davis was enrolled in TCRS in August 2014. A spokesman for TCRS said for the majority of the past four years, the town has reported her as a full-time employee.
“When the employer reported her (Shults-Davis) to TCRS the very first time in August 2014, she was marked as a part-time employee,” said Gillian Johnson, spokesperson for the Tennessee Department of Treasury. “The following month, and every month since, she has been reported to TCRS as full time.”
Shults-Davis said she contributed the full amount allowable toward the pension and has received no contributions to her pension from the town. “I didn’t want the town’s budget to be burdened by my enrollment,” she said.
But on Wednesday, June 27th, Erica Nale, the Assistant Director of the Tennessee Consolidated Retirement System wrote the Unicoi town recorder saying, “it is the decision of our office that Ms. Shults-Davis is not an employee of the Town and, therefore, ineligible for membership in TCRS.”
Nale instructed the town to “please immediately cease reporting Ms. Shults-Davis to our office and withholding contributions from payments made to the law firm.”
The letter stresses the urgency of the matter, informing the town that allowing non-qualified employees to participate in the state’s retirement system could have serious consequences. “TCRS could lose its qualified tax status,” the assistant director writes.
A Unicoi Alderman said the letter proves a point he tried to make before a recent budget vote.
“There’s no doubt in my mind this is wrong,” said Alderman Roger Cooper in an interview with News Channel 11 referring to Shults-Davis’ enrollment in TCRS.
He made a motion at a June 18th public meeting to remove the town attorney’s pension contribution from next year’s budget.
“Our personnel policy says that you have to be a full-time employee to be able to get on the town’s TCRS program,” Cooper told the BMA. His motion was defeated in a 3 to 2 vote.
“What I know, I had to say something,” Cooper told News Channel 11. “If I had sat there and said nothing, I’d be just as guilty as the next person. And I voted against the budget because of that.”
Cooper also asked for a review by TCRS administrators. That review resulted in the letter delivered to the state this week.
Shults-Davis said she was invited by a town official to join the program in 2014, and town staff oversaw the enrollment process. She says she was informed a resolution approved by the Unicoi BMA in 2013 cleared her for participation in the program.
“This is basically an accounting issue,” Shults-Davis said. “As far I knew, all this was done correctly.”
“Am I or am I not in an employment relationship with the town? Well, I thought I was since I was hired in 1999,” she said.
Shults-Davis said she’s currently seeking more guidance from TCRS, and after reviewing IRS regulations, she believes she is an employee of the town.
“I wish that I could have been given the information from TCRS prior to this,” she said.
“I’ve paid all my premiums,” Shults-Davis said. “We’ve done what the state has told us at every turn. I’m not sure why this is an issue.”
Alderman Cooper said he wants the issue resolved quickly.
“We just need to do what is right and make it right and go forward and learn from our mistakes in the past,” Cooper said.
Friday afternoon, town Recorder Michael Borders said he’s already halted deductions to TCRS for Lois Davis-Shults and reimbursed her for amount deducted by the town in May.
The letter from TCRS to Unicoi said once Davis is removed from the pension system, what’s called a “corrective action plan” will be developed.