Following is the executive summary of a recent report from OPM’s inspector general finding that OPM improperly paid $120 million on average in each of the last five years to deceased annuitants, typically because the survivors did not report the death and because the government failed to cross-match its annuity rolls against records of deaths.
The overarching reason for this report is to demonstrate the need to stop the flow of improper payments from the Federal Government’s Civil Service Retirement and Disability Fund (CSRDF) to deceased annuitants and survivors (annuitants), averaging $120 million annually over the last five years. While we are concerned with all post-death improper payments, our paramount concern is with the improper payments resulting when an annuitant’s death is not reported or detected and payments continue, sometimes for many years.
This report gives the current status of the prior recommendations we have made in this area, but most importantly reemphasizes our concern that sufficient funds and resources of the U.S. Office of Personnel Management (OPM) be focused on this serious matter in order to bring about a full measure of success. Director John Berry and I agree that it is time to stop, once and for all, this waste of taxpayer money.
Based on our recommendations, OPM has taken positive steps to address this issue. Regular meetings over the last three years between subject matter experts in OPM’s Retirement Services, Retirement Policy, the Office of the Chief Financial Officer, and the Office of the Inspector General (OIG) have led to enhancements in procedures.
As a result of the efforts of this working group, a number of improvements have been achieved since the original OIG paper (July 2005), and our last paper (January 2008) with respect to the goal of reducing improper payments. In retrospect, however, these improvements were clearly only partial remedies at best. These improvements include:
Death Master File Match.• Retirement Services committed to performing, in addition to the weekly match, an annual computer match between its annuity roll and the Social Security Administration’s (SSA) death records. The annual match was performed in 2005, 2009, and 2010, and is scheduled to be performed again in the Fall of 2011;
Over 90 Project.• OPM sampled the annuity roll population over 90 years old (Over 90 Project) in September 2009, which at that time totaled 125,000, to confirm that the annuitants are still alive and appropriately receiving an annuity from the CSRDF. The sample consisted of 4,400 annuitants. Of this sample, six were determined to be deceased but were not identified during prior computer matches with SSA. In addition, as of the December 2010 report on this project, 144 annuitants in the sample had not responded to letters of inquiry from OPM and their annuities were placed in a suspended payment status. OPM is determining how best to proceed on these cases;
1099R• . These forms are mailed out annually to annuitants and report taxable annuity income received. As of May 2011, OPM received approximately 33,000 returned 1099Rs from the January 2010 mailing and Retirement Services is analyzing the forms to determine whether the annuitant has a new address that has not been reported to OPM, or is no longer living;
Automated Check Reclamation System.• In January 2010, OPM implemented an Automated Check Reclamation System to streamline the reclamation process, thereby saving significant time and resources. A reclamation is an action taken by the Government to recover improper post-death payments from financial institutions. The automated system ensures that all annuitants removed from the active annuity roll because of death are processed through OPM’s Death Data Reporting System, which automatically initiates a reclamation action through the U.S. Department of Treasury (Treasury);
Treasury Denied Reclamations.• Due to Treasury regulations and procedures, not all requests submitted to Treasury for reclamation of post-death payments are sent to the financial institutions for recovery. Financial institutions are not liable for the return of post-death payments made more than six years prior to the date of the request for reclamation. Therefore, at our suggestion, a process was implemented by OPM to reach out to financial institutions for reclamations denied by Treasury; and,
Improving Death Reporting• . To improve the timeliness of death reporting, OPM enhanced communications with annuitants and their family members through changes to mass mailings, the creation of video messages for the OPM Website, and recorded telephone messages activated while placed on hold by OPM Call Center representatives.
Despite these positive developments, there remains a high probability that egregious loss of monies from the CSRDF will continue and require strategic corrective actions. Each year new cases are identified which support this concern, such as an annuitant’s son who continued to receive benefits until 2008, 37 years after his father’s death in 1971. The improper payment in this case exceeded $515,000 and was reported to OPM when the son, who fraudulently received the payments, died. The improper payment was not recovered.
When compared to other Federal benefits programs, the improper payment rate is arguably low; however, the amount of post-death improper payments is consistently $100-$150 million annually, totaling over $601 million in the last five years. In addition, the balance due the Government related to these improper post-death payments during the last five years has risen much faster (70%) than total annuity payments (19%), and stronger steps must be implemented by OPM to identify and recover improper payments.
The Administration and Congress have determined that the amount of improper payments Government-wide is unacceptable and as such, efforts must be made to identify the root causes of the improper payments and put in place a corrective action plan to reduce them. Even though the Office of Management and Budget has not placed the CSRDF in the high risk category because its improper payments fall below 2.5% of the fund’s total disbursements, OPM must pursue aggressive and effective strategies for the integrity of the CSRDF, and especially for the sake of the taxpayer.
