Legality, Procedure of Lower Merion's Deferred Compensation Questioned

Lower Merion Commissioner Jenny Brown on Wednesday night called for a private investigation into Lower Merion Township’s deferred-compensation plan for township management employees. 

“I have received a lot—a lot—of inquiries about it,” Brown said during Wednesday evening’s finance committee meeting. “I will say that some of what I am about to say makes me absolutely heartsick.”

The issue of by Brown, who along with Commissioner Lew Gould expressed concern they had never known the program existed. They also questioned the program's up-to-7 percent contribution by employees and 7 percent employer contribution, regardless of whether the employee defers any compensation.

The deferred-compensation plan affects some 40 township employees—among them Township Manager Doug Cleland, after his previous contract expired at the end of 2011. (The township contributes 8 percent to Cleland's deferred-compensation plan and 10 percent to township secretary Eileen Trainer's plan.)

The problems Brown sees

Brown addressed what she sees as two major problems with the plan: The first is an “utter lack of transparency.” 

“I was told to look at page 323 of the proposed budget,” Brown said. “There was a mention of the deferred-compensation plan, and no mention of employer contribution. When I looked at it today, page 323 of the budget has been changed. The budget, as it was proposed, did not have this information.”

The second, she said, is the legality of the plan.

Specifically, she said, she questioned that taxpayer dollars could be put toward an employee's deferred compensation plan.

In her research through the state’s Public Employee Retirement Commission, she said she was told the limit for township contribution to an employee’s deferred compensation is zero.

“I am calling this evening for the immediate suspension of township funds to deferred-compensation plans,” Brown said. “I would also like to call for independent counsel to review this matter.”

Brown also asked that no action be taken on Cleland’s contract, scheduled for next week’s agenda, until the issue of the deferred-compensation plan has been resolved.

Rogan's reaction

Board President Liz Rogan said she was shocked at Brown’s accusations. 

“I would just have greatly appreciated if you had spoken to me about this, rather than a 20-minute soliloquy be discussed in public,” Rogan said. “To present this as some behind-door, secret, illegal, purposeful act of the township staff and the township manager, I think is… I’m kind of surprised you would even suggest that.” 

Rogan said if Brown had spoken to her about it first, they could have had a “reasonable and informed discussion.”

“I think that’s a very interesting statement you’ve made,” Gould said to Rogan. “The facts are, a number of us have been trying diligently to find out information that doesn’t exist. Much to my chagrin and dismay, if I want to find out anything about what’s going on here, I have to find it out myself.”

Gould added he would not be voting for the renewal of Cleland’s contract. 

After more debate about whether to get back to agenda topics, several township residents in the audience voiced their desire to continue the conversation. Finance committee chairman Paul McElhaney addressed Brown.

“We do care,” McElhaney said. “We have asked staff to investigate, not even a month ago, and they’re doing their due diligence and doing their research. It may not be at the pace you would like it to be.”

Rogan said Lower Merion wouldn’t be the community it is if township staff was “bamboozling” people the way in which Brown described.

“When you don’t know about something, it doesn’t mean it’s illegal,” Rogan said. “We have an obligation of this board to work together. Then we could have taken it in a little more of an ordered fashion.”

Brown replied: “This is what happens when you don’t address it.”

Residents' perspective

Bala Cynwyd resident John Maley said he came to the meeting after watching the debate on LMTV.

“The argument I have is, anybody that has an opportunity to take a deferred compensation plan and not take it is insane,” Maley said. “For the commissioners to say they’re unaware of it—I knew it was there [in the budget]. I have known it was in there every year. If you can’t read it from cover to cover and find it, you’ve got a real problem.”

Residents Richard Kaufman and Lou Barson, however, shared Brown’s position on the matter. Both were Republican candidates for the BOC in November.

“I feel like I’m in the Twilight Zone a little bit,” Barson said. “I understand the need to hold off if you don’t have all the information… If you ratify the documents, if those have been tampered with and changed—it isn’t in the 2011-2012 budget, and now it’s in there. We have to discuss that tonight at the bare minimum.”

The CFO speaks

The township’s Chief Financial Officer Dean Dortone addressed questions raised.

“We just finished with the printer’s this week,” Dortone said. “I had no idea it had even been posted [to the township website] yet. What Doug and I had discussed was, since this discussion came up, that we should put more information in. So we put more information in… That’s what’s in this new adopted budget that’s going to be given to the board.”

Brown said that information was not in the proposed budget.

Rogan and Commissioner Dan Bernheim again said it didn’t make sense to continue the conversation.

“Dean Dortone is in front of us telling us how the document got changed,” Rosenzweig said. “It’s ridiculous to say it has to be deferred to a future time."

Dortone said he wouldn’t hesitate to answer questions from the board.

“There’s nothing to hide,” Dortone said. “We usually communicate before anything goes out on the website. That’s what’s occurred to date. I’m assuming you have seen it, in the way you described it, with the edits we made.”

Brown questioned why the board was not told the budget document had changed. 

“That’s exactly why I wanted to end this meeting,” McElhaney said.

Clarification: The township contributes 7 percent to management employees' deferred compensation programs. Employees may or may not contribute to the program.