Malloy administration says it’s negotiating to fix disability pay controversy

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Lisa Grasso Egan, undersecretary for the Office of Policy and Management\’s labor relations unit.

A representative of Gov. Dannel P. Malloy’s administration told state retirement officials Thursday that the administration is negotiating with employee unions and hopes to soon resolve a controversy involving millions of dollars in disability benefit payments.

Lisa Grasso Egan, an undersecretary with the Office of Policy and Management’s labor relations unit, also told the State Retirement Commission that OPM respects concerns raised Wednesday about a breakdown in controls over disability benefits.

“The state has been engaged (in negotiations) with the unions,” said Egan, who also serves on the commission. “…We will provide an update when there is a resolution to these issues. We hope there is one soon.”

Egan did not disclose when those negotiations began.

“There are parts of the agreement concerning disability retirement which both parties would like to improve in the interests of both the members and the state, and the parties are in discussions about the best way to do that,” Hartford attorney Daniel Livingston, chief negotiator for the State Employees Bargaining Agent Coalition, wrote Thursday in his first public statement on the auditors’ report. “One of the strengths of collective bargaining is we can do that together, and as always, if there are disagreements about the interpretation or application of the collective bargaining agreement they can and will be resolved by a neutral arbitrator.”

Deputy State Comptroller Martha Carlson requested the update from Egan in light of a report issued this week by Robert M. Ward and John C. Geragosian, the state auditors of public accounts.

Ward and Geragosian warned of 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 it ever since. Lembo also noted his office cannot unilaterally resolve the problem, which is subject to collective bargaining.

According to state law, an employee is disabled for up to 24 months if unable to perform the duties 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.

After several requests for disability benefits were denied by the commission based on a revised definition of “suitable or comparable” in the fall of 2013, Comptroller Lembo determined the new definition should be an issue for collective bargaining. He then suspended the recently redefined standard.

“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 that this could involve “millions in dollars in payments.”

Lembo insisted Wednesday that he immediately notified both the administration and SEBAC and that he and his representatives “have spent nearly two years aggressively pursuing a resolution by labor and management.”

Also at Thursday’s meeting, a representative of state Treasurer Denise L. Nappier added her voice to those of the auditors in urging a swift resolution to this problem. As chief fiduciary officer of the state’s pension programs, Nappier oversees the investment of those funds.

“Both the auditors and the comptroller have raised issues that require immediate resolution,” said Lee Ann Palladino, the treasurer’s representative on the retirement commission and chief investment officer for the state’s retirement plans and trust funds. “Specifically there must be clarification of the governing statutes and how they are to be interpreted; as well as the roles and accountability of this commission, the Office of the Comptroller and/or other entities that may be involved.”

Palladino added that “at the end of the day, the board needs assurance that there is a plan of action in place to address these issues and that, going forward, there is a clear process for administering benefits in conformance with state law.”

Livingston also wrote in his statement Thursday that SEBAC appreciates the auditors’ concerns but Ward and Geragosian are “quite off the mark” in suggesting “that disabled public service workers are receiving payments they shouldn’t be receiving. The report also fails to mention the risk of threatening to throw people off retirement who have little means of defending themselves.”

With the legislature coming back into special session this summer to conclude work on the next state budget, House Minority Leader Themis Klarides, R-Derby, called Thursday for lawmakers to craft reforms to the disability pay system and addressing the concerns raised in the auditors’ report.

“It is precisely this matter that erodes public faith in state government and prompts voters and taxpayers to question whether their elected officials are capable of managing a bureaucracy that continues to grow and become less accountable to the public every day,” Klarides wrote in a letter to House Speaker J. Brendan Sharkey, D-Hamden, in which she urged for the disability pay issue to be added to the special session agenda.