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Auditors Raise Questions About Pension Calculations

by | Nov 25, 2015 1:15pm
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Posted to: State Budget, Pensions, State Capitol

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State auditors raised concerns Tuesday about how pension payments for state employees are being calculated and the interest costs tied to a backlog in processing those payments.

The report by Auditors of Public Accounts John Geragosian and Robert Ward covers 2009 through 2011. Lt. Gov. Nancy Wyman was state comptroller in 2009 and 2010. State Comptroller Kevin Lembo was elected in 2010 and took office in 2011. The state comptroller’s office oversees the retirement system.

The report makes 17 recommendations, two of which were repeated from previous audits.

The auditors focused on 40 pension recalculations and were unable to duplicate any of the calculations.

“The process of finalizing pension calculations is so complex and labor intensive that it is difficult for the results to be duplicated,” the audit states. “This could result in improper payments. Consequently, retirees are not receiving their finalized benefit in a timely manner.”

Auditors also found there was a significant backlog of applications. At the time of their review in May 2014, there were 11,880 applications waiting to be finalized. Since interest begins accruing after six months and the average time frame for finalization has been six years and one month, the sample of 40 retirees cost the state $41,000 in interest payments.

Auditors found that interest payments totaled $875,572 in 2009, $449,139 in 2010, and $860,203 in 2011.

The state comptroller’s office told auditors that it has been making an effort to reduce the backlog of retirement applications. It is also in the process of working with Oracle to design a module to automatically calculate retirement benefits.

Auditors also raised the issue of disability retirements.

The audit found that the office notified one retiree that they had been approved for a permanent disability retirement when supporting documentation showed the individual was denied. The individual died two years after receiving the letter, but their beneficiary is still receiving 50 percent of the disability pension.

“There is a considerable risk that individuals are receiving disability retirement benefits which they are not entitled to, resulting in improper costs to the State Employees Retirement Fund,” auditors states.

The comptroller’s office disagreed with the finding. It said the individual was correctly given those benefits and it’s unclear why the denial was “erroneously included in the Medical Examining Board determination.”

But there were other concerns regarding disability retirements and when they are granted.

Auditors found there were nine out of 26 instances where the physicians on the Medical Review Board did not answer whether the retiree could return to their former job. There also was a failure to track the return of all disability retiree forms and follow up on cases in which a form was not returned.

The comptroller’s office said there were scheduling issues with the Medical Examining Board and its availability to review cases. It said that issue has since been resolved with the University of Connecticut Health Center where the physicians practice.

There were also issues about what the physicians were using to determine a disability. The unions and the state agreed to a new standard clarifying the definitions of “suitable and comparable,” when considering other state government work available to the individual with a disability.

“The Retirement Services Division is revising its processes and procedures to ensure that its staff and the Medical Examining Board are appropriately trained as to the clarifying standard,” the comptroller’s office wrote in its response to the auditor’s recommendations.

Some of the issues pointed out in the auditor’s report will be addressed when the Oracle Pension Module is fully installed, the comptroller’s office said. The installation is expected to be fully operational by spring 2016.

“As always, we appreciate the auditors’ recommendations,” Lembo said in a statement Wednesday. “Our goal is to continually re-evaluate practices and make improvements where appropriate. There has been a state retirement backlog for decades — and I hope to be the first state comptroller in decades to eliminate it entirely, a process that begins this spring when our pension system will officially become automated and allow for more rapid finalizations.”

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