Auditors: State fails to safeguard millions in disability benefits

State Auditors Robert Ward and John Geragosian.

The state auditors issued a special report Wednesday disclosing a major breakdown in safeguards in the comptroller’s office that could have led to the improper payment of millions of dollars in disability retirement benefits.

But Comptroller Kevin P. Lembo responded that he notified state employee unions and the Office of Policy and Management about this problem two years ago and has been urging action to resolve this ever since. Lembo also noted his office cannot unilaterally resolve the problem, which is subject to collective bargaining.

Auditors John C. Geragosian and Robert M. Ward wrote in their report to Gov. Dannel P. Malloy that the Retirement Services Division:

• Stopped performing required eligibility follow-up tests.
• Failed to follow a key ruling of the Medical Examining Board.
• “Failed to follow through completely” on a legal investigator’s reports.
• Did not investigate beneficiaries who stopped responding to state surveys.
• And calculated benefits based on an arbitration award that conflicts with other limits set in state law.

“We consider these matters to constitute a potential breakdown in the safekeeping of SERS (State Employee Retirement System) resources,” Geragosian and Ward wrote.

According to state law, an employee is disabled for up to 24 months if unable to perform the duty for which he or she was hired because of job conditions.

After that, the employee may continue on disability retirement only if certain other conditions are met. In particular, that employee must not be able to perform some other “suitable or comparable” state occupation.

In late 2012 the retirement division began to develop a more detailed definition of “suitable and comparable.”

This led briefly to a “significant increase” in denial of benefits by the Medical Examining Board at meetings held on Sept. 27 and Oct. 11, 2013, Geragosian and Ward wrote.

The comptroller determined the new definition should be an issue for collective bargaining, and the recently redefined standard was suspended. The auditors added that, “the office of the State Comptroller feels it would be irresponsible to move forward and remove benefits without knowing that the collective bargaining issue has been settled.”

The matter still hasn’t been resolved, though the auditors wrote that Lembo notified the unions last month that he plans to bring this before the State Retirement Commission at its meeting on Thursday.

“The failure to conduct 24-month entitlement reviews for such an extended period has most likely resulted in considerable payments in disability benefits to retirees who were no longer eligible to receive them,” the auditors wrote, adding this could involve “millions in dollars in payments.”

Comptroller Lembo responded in a written statement that, “I share the concerns of the Auditors of Public Accounts and, in fact, have spent nearly two years aggressively pursuing a resolution by labor and management as they must reach a collectively bargained determination on the interpretation of the state’s disability statute. Unfortunately, the Office of the State Comptroller lacks authority to unilaterally decide collectively bargained matters.”

“It is within everyone’s interest – both the state and disability retirees – that labor and management resolve this longstanding question about the interpretation of the phrase ‘suitable and comparable’ as it applies to the eligibility of those state employees with a non-service connected disability,” Lembo added.

The state sets benefits for all of its employees and retirees by bargaining collectively with the State Employees Bargaining Agent Coalition, a panel of represents from all of the different unions representing state workers.

Hartford attorney Daniel Livingston, SEBAC’s chief negotiator, could not be reached for comment immediately after the auditors issued their report.

The auditors are required by state law to notify the governor’s office of any accounting or procedural irregularities deemed potentially egregious. Malloy’s office responded shortly after the auditors’ report indicating it was under review.

“This is ‘Exhibit A’ of why our state is going broke,” said Sen. Michael McLachlan of Danbury, ranking Republican senator on the legislature’s Government Administration and Elections Committee.  “Look no farther than this report.  Taxpayers’ money is flying out the door with no oversight.  It’s shameful, and it adds insult to injury since we are mired in this budget crisis.”

“At a time when Connecticut is facing an incredibly challenging budget, it’s even more infuriating to learn about these irresponsible, inexcusable errors,” added Senate Minority Leader Len Fasano, R-North Haven. “How can we expect the public to take on more burdens when the state fails to control internal waste and watch its own spending closely? This directly challenges the public trust in government. It is mind blowing to think taxpayer dollars could be so unprotected.”