Federal Retirement Processing: Ensuring Proper and Timely Payments

2/01/2012

Subommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia - Senate Homeland Security and Governmental Affairs Committee

Chairman Akaka, Ranking Member Johnson, and other Committee Members, thank you for allowing me to share with you the experiences of my union members with federal retiree pension processing. NTEU represents over 150,000 employees in 31 different

agencies.

It is clear that there are serious problems with OPM’s processing of federal retiree annuity payments. I have contacted OPM numerous times to ask what is being done to get accurate and timely pension checks to my members. One of my members wrote to me that he retired after 40 years with the IRS. Six months later, he is still receiving his interim annuity. He is suffering tremendous financial hardship because his interim payment is only 31% of his estimated annuity. Recent news reports indicate that another retiree retired May 30, 2011 and has been told it will be another 3 to 5 months before he receives his full annuity. Still another reports that his agency estimated an annuity of nearly $2400 per month, but right now receives only $1000. He’s been told it will take 8 months to receive the full amount.

OPM contends that Interim Payments average 80.3% of the final annuity amount, but we have heard from many retirees who are receiving less than half that for long periods of time. Particularly hard hit are those retirees who are eligible for the FERS Retirement Supplement. For a federal worker making $50,000 when they retire, this can mean a loss of almost $800 per month. And it is completely unfair that no interest is paid during these delays, even though retirees must pay interest on redeposits into the fund. Interest should be paid on these delayed payments.

OPM notes that it cannot reflect the Supplement in the interim payments because the agencies do not provide an estimate of the annuity supplement. It is unclear why the Social Security Administration can’t make that information available in a timely manner.

According to OPM’s own figures, the average time to process a new retirement claim is currently 156 days and the current backlog of cases is 48,378. This is an enormous problem, creating serious hardship for thousands of retirees who dedicated their lives to careers in public service. OPM seems to recognize the severity of the problem, stating in its recently released, Strategic Plan for Retirement Services, “All components of RS have workload backlogs, and the quality of service OPM is currently providing to its customers is not acceptable. In particular, the agency’s new claims process needs to be improved so that annuitants can receive the benefits they have earned in a timely manner.” (p.2) The question is whether OPM’s new plan to address the problem can be quickly implemented and also whether it is enough to end the unacceptable delays.

There are many reasons that the processing of retiree annuities is in such terrible shape. Not least among those reasons are the failed efforts of the Bush Administration to automate the entire annuity processing system in one fell swoop, with the costly RetireEz fiasco that was cancelled with millions of dollars lost and nothing to show for it.

Budget and staffing issues have also contributed to the problem. In anticipation of the RetireEz system coming online, OPM reduced claims processing staff between 2005 and 2009. More recently, the 2011 Retirement Services budget was cut almost $6 million below its 2010 level. A $3.8 million increase for 2012 still leaves the division $2 million below 2010.

NTEU is pleased that OPM has produced a plan to address the unacceptable processing problems. OPM’s Strategic Plan for Retirement Services has a laudable goal, “to eliminate the claims backlog within 18 months and allow RS to adjudicate 90 percent of all new claims within 60 days of receipt from the agencies.” It also commits to monthly reporting on the number of claims received and processed and the size of the backlog. This reporting is absolutely necessary to determine whether progress is being made.

The elements of the plan include expanding capacity through adding staff and work hours as well as increasing efficiency; partnering with agencies and making improvements in information technology.

NTEU questions whether 56 new Legal Administrative Specialists (LAS) and 20 new Customer Service Specialists are enough to address the huge backlogs. Due to training needs, these new hires will not add any increase in claims processing capacity until June or July of 2012. NTEU would support action to immediately maximize the use of detailees from other agencies that have LAS or similar experience in order to speed up capacity increases. Also, while NTEU has opposed efforts to expand the use of dual compensation waivers for reemployed annuitants when there is no specific need for their skills, this is a situation where we believe the skills of retired LAS employees are in desperate need to help address these backlogs and we would support dual compensation waivers to bring LAS experienced retirees back to OPM until this problem is solved.

In addition, while we strongly support efforts to increase efficiency and productivity in annuity claims processing, we question whether the report’s proposed changes, including limiting administrative duties for LAS, will increase their claims processing production from 700 to 1100 per year as predicted by OPM. We have seen efforts to dramatically increase individual production efforts in other agencies where we represent employees result in decreasing accuracy and high turnover, which ultimately slows productivity.

In terms of partnering with agencies, involving CHCOs and providing agency package checklists are fine ideas, but “considering additional audits of the agencies where delays are consistently caused by incomplete case submissions,” as the report states is not enough. If some agencies are consistently providing incomplete information, something more serious than a possible additional audit needs to happen. At a minimum, the monthly reports OPM intends to initiate should include information on the speed, accuracy and completeness of agency case submissions and the CHCOs of agencies that consistently have problems must be charged with taking immediate action to improve those submissions.

Clearly, as the report indicates, information technology must be improved over the long term. The amount of manual processing of paper documents in the retiree annuity claims process is staggering. Agencies can’t transmit raw data from agency estimators electronically and can’t transmit applications and supporting documents electronically. We would urge OPM to aggressively pursue the pilot project mentioned in the report to work with agencies to use an online retirement application developed by private sector vendors.

I applaud Director Berry for focusing attention on this matter. So many federal employees are suffering because this system is broken. We remain hopeful that funds will be available and pressure maintained to complete the plan, and pledge to do whatever we can to help.