New Access to Data Aids Probes into Fraud against Federal Retirement Program, Says Report

The inspector general’s office at OPM has said that access it gained last year to data in the Treasury Department’s “Do Not Pay” database is boosting its investigations into fraud against the federal retirement program.

That access “allows our investigative staff to use the robust death data available via the portal to compare the OPM annuity rolls with the death sources in the DNP system and perform searches for deceased annuitants and survivor annuitants. Thus far, we have found 1,200 annuitant records and more than $15 million in annual annuities for the OPM OIG to review for potential investigation and action,” the IG said in a report.

Those investigations are ongoing but already have identified $1.6 million in payments to deceased annuitants and have recovered $420,000, it said—including one case in which $87,000 was recovered.

Failure to report the death of an annuitant—usually by a family member who then receives payments they are not entitled to—underlies much of the fraud against the program.

Those responsible use techniques such as forging responses to OPM’s Address Verification Letters or opening bank accounts under the name of a deceased annuitant.

It cited cases finalized in the latest six-month reporting period including:

• a son and grandson of a deceased annuitant who received some $128,000 in federal retirement and $11,000 in Social Security benefits;
• a deceased annuitant’s daughter who did not inform federal agencies of her mother’s death and misappropriated funds from multiple federal agencies, including $71,000 in federal annuity benefits; and
• a stepdaughter of a survivor annuitant who had dementia who misdirected $47,000 through identity theft.

Some common methods of pension fraud include:

Identity Theft & Deceased Beneficiaries

• Fraudsters steal the identity of a deceased pension recipient and continue collecting benefits.
• In some cases, family members or caretakers fail to report a death and continue withdrawing funds.
• This often goes undetected if the pension provider doesn’t cross-check death records with Social Security databases.

Phantom Beneficiaries

• Employers or insiders create fake employees with forged records to collect pension payments.
• These “phantom” retirees never worked for the organization, but draw funds as if they had.

Misappropriation by Fiduciaries

• Pension fund managers divert contributions into personal accounts or fake investment vehicles.
• This includes Ponzi-like setups where newer contributions are used to pay earlier “returns.”
• Trustees may falsify accounting records to hide losses or embezzlement.

Early Withdrawal or Rollover Fraud

• Fraudsters trick plan participants into rolling over funds into illegitimate “self-directed” plans or investments.
• The victim unknowingly authorizes a transfer, and the scammer drains the funds.

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See also

Alternative Federal Retirement Options; With Chart

Primer: Early out, buyout, reduction in force (RIF)

Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process

Deferred and Postponed Annuities Under CSRS and FERS