The Massachusetts State Retirement Board (MSRB) was delayed in issuing initial monthly benefit payments to retirees. Our analysis of the 6,032 retirees whose effectives date of retirement were during our audit period showed that only 175 (3%) received their first monthly benefit payments within the required timeframe. The delays may have resulted in financial hardship for retirees.
On average, the first payment took 115 days, which is 53 days longer than the state-mandated 62-day8 timeframe. For the 6,032 retirements included in our analysis and testing, retirement processing times ranged from 23 days to 907 days, as measured from dates of retirement to the dates of initial payment. The detailed substantive testing we performed on 100 noncompliant random samples (60 in the Noncompliant—General segment and 40 Noncompliant—Outlier) supports the processing delays identified by our analytical procedures. The detailed substantive testing examined documentation such as retirement applications, application checklists, application receipt acknowledgement letters, Salary Request and Release Forms, benefit request sheets, data and annuity sheets, first pay letters, and OnBase workflow reports.
Section 13(1)(b) of Chapter 32 of the Massachusetts General Laws states,
The first . . . full payment [to a retiree] shall be due and payable on the last day of the month following the month in which falls the date as of which such annuity, pension or retirement allowance becomes effective. If such effective date is a day other than the last day of the month in which it falls, a pro rata payment shall be allowed for the period following such date and ending with such last day.
We believe this excerpt indicates that the first full payment is due and payable on the last day of the month that follows the month of retirement. If the retirement date falls on the last day of a month, then payment is due on the last day of the following month and payable in a minimum of 28 days. If the retirement date falls on the first day of a month, then payment is due on the last day of the following month and payable in a maximum of 62 days.
Reasons for Delays
According to MSRB management, delays in the issuance of first benefit payments are primarily caused by submission of inaccurate or incomplete information by retirees or employing agencies. Management indicated that when this happens, the processing of applications slows or stops until accurate and complete information is received, and retirees are not notified of the delays after application receipt acknowledgement letters are issued. MSRB management added that the agency often needs additional time to conduct research, verify information, request additional or revised information, and confirm the accuracy and completeness of the data used to calculate benefits.
In addition, our audit work indicated that one cause of the payment delays was the timing of the issuance and receipt of Salary Request and Release Forms. Specifically, MSRB officials told us they do not send a form until about two weeks before a member retires, so as to obtain the member’s most recent possible pay rate, retirement contributions, and salary history. They stated that they do this in order to calculate benefits accurately and avoid making adjustments due to changes in this information. They also told us that in many instances, multiple salary requests are sent before responses are received, so there can be delays in receiving the necessary information.
In its response to our audit dated December 1, 2020, MSRB indicated that there were additional reasons for delays in the issuance of first benefit payments, including the following:
Contributing factors during the audit period include the conversion to MARIS in January 2017 which affected all MSRB operations as the new operating software was brought on-line and staff devoting to it significant time and effort to the implementation during the audit period. Also, due to the elevated quality assurance requirements built into MARIS, there are multiple approval steps required to process a benefit transaction and create a specific audit trail. These steps may add time required to initiate benefits in MARIS when compared to the previous . . . system. . . .
MSRB staffing limitations and turnover have also impacted benefit productivity and workflow. . . . During the audit period, the MSRB lost approximately 36 staff members overall from an organization of 70–75 at the time. Of those separating from service 25% were Benefit Calculation staff.
- MSRB should send Salary Request and Release Forms to employing agencies upon receipt of retirement applications or within two weeks thereafter.
- For applications whose processing is delayed, MSRB should notify applicants, indicate reasons for delays, and outline required remedial action.
We appreciate that the [Office of the State Auditor, or OSA] audit staff reviewed the processing steps and the work product associated with new retiree applications, and understood the challenges presented to the MSRB in receiving accurate information necessary to initiate retirement benefits. The items noted in the report that interfere with the MSRB’s processing represent cumulative contributing factors, many of which are not always within the control of the MSRB to mitigate easily. . . .
The MSRB has actively implemented several measures to mitigate the impact of initiating benefit payments that could affect retiring members. For example, since 2015 the MSRB has made available an advance benefit payment for pending retirees. Advance payments are permitted by Chapter 32, §98 and are available to new retirees if their benefit payments have not been initiated after forty-five (45) days from their retirement date. This information is provided during retirement counseling, on the retirement application and at several locations on the MSRB’s website associated with filing to retire. The advance process has allowed new retirees to receive benefit payments in the form of a pre-loaded debit card up to an amount of 50% of their expected first payment the amount of which is deducted from their initial benefit payment.
Additionally, the MSRB has more recently implemented a monthly accelerated payment program. This allows the MSRB to identify new retirees who have not yet received their first benefit payment and to receive in mid-month their retro-active benefit payments (from their retirement date through the end of the prior month). This avoids these new retirees having to wait until the end of the current month to receive the retro benefits together with their first month’s benefit payment.
The MSRB is also compelled to note that the sample of retirements reviewed by the OSA included almost 300 applications for Disability Retirement benefits. The application process for these benefits inherently takes longer to complete given the statutory requirements including: scheduling of medical panel examinations by [the Public Employee Retirement Administration Commission, or PERAC]; submissions of a statement by the employer; review by a retirement board; and final approval by PERAC before benefits may be initiated. As a result, the permissible time period for making a final determination of disability cases by retirement boards and initiating payments, with certain exceptions, is several months from the date of filing an application as permitted by G.L. c.32, §7(6). Including the time periods for disability cases in the applications reviewed would incorrectly inflate the processing times of the sample used. . . .
Even more direct impacts on the retirement process arise from the responsiveness and accuracy of [Human Resources, or HR] / Payroll data from employing agencies. Experience has demonstrated that the retirement of many Human Resource and Payroll personnel across state government during the 2015 Early Retirement Incentive Program compounded the MSRB frequently receiving incomplete or inaccurate member data or having to issue multiple requests. . . .
MSRB staff and the Board is open and prepared to explore implementing the earlier issuance of the Salary Request & Release Forms in the application process and copying members of ongoing data requests sent out by the MSRB. While potentially helpful and keeping retiring members informed of MSRB efforts these measures may have impacts beyond the control of the MSRB including:
With most retirees submitting their application one to three months ahead of their retirement date, this recommendation will require employing agencies to project and provide a breakdown of the types of specialty pay (e.g. differentials) the member may receive through the date of retirement. However, they will not be able to provide the total amounts. While sending the requests sooner would be useful to identify specialty pay, ascertain if it has been properly reported and will be pensionable, agencies would still have to submit final totals, any revisions in salary rates and specialty pay types once the employee has separated from service to ensure that we have received the correct information.
MSRB staff based on their experience would be concerned that sending the Request Form too soon may also create confusion or lead to the Form being ignored. Additionally, an earlier issuance of the Request Form leaves unresolved the issue of the MSRB receiving accurate data, including retroactive pay information, if a retroactive adjustment is made in between completing the form the member’s retirement.
Non-responsive agencies will continue to require automated follow up requests, although the MSRB will review having retiring employees copied on any follow up inquiries to agencies.
Requesting salary information this far in advance may also increase the administrative workload and lead to uncertainty among agency HR / Payroll staff in cases of retirees who eventually change their retirement date or withdraw their retirement applications altogether.
As was discussed the submission of retirement applications also competes for the attention of agency and MSRB staffs against the volume of retro-active benefit adjustments which must be processed. Such adjustments continue to be created as funding is approved by the Commonwealth for collective bargaining agreements which are settled. Recently, there were more than 1,000 such adjustments pending.
OSA acknowledges that retirement application processing times vary widely because of several factors, some of which may not always be in MSRB’s control. However, as noted above, during our audit period, 97% of all new retirees did not receive their first benefit payments within the timeframe prescribed by Section 13(1)(b) of Chapter 32 of the General Laws. We believe this indicates significant problems in this area. To the extent possible, MSRB needs to address the problems.
As noted above, the timing of the issuance and receipt of Salary Request and Release Forms was one of the causes of processing delays. Therefore, we recommended that MSRB consider sending Salary Request and Release Forms to employing agencies upon receipt of retirement applications or within two weeks thereafter and that MSRB notify applicants, indicate reasons for delays, and outline required remedial action. Although we acknowledge that making these changes to the retirement application process may present challenges to MSRB, we believe that it will make the process more efficient. MSRB indicates that it will consider implementing our recommendations. We acknowledge that it is ultimately up to MSRB management to determine what measures it can and should take to improve this process given its available resources.
OSA acknowledges that it can take MSRB longer to process disability retirement benefits than regular benefits. However, applications for disability retirement benefits represented less than 5% of the total applications that MSRB processed during our audit period. For the 5,738 non-disability-related retirements in our population, it took an average of 107 days for retirees to receive their first monthly benefit payments. This is still 45 days longer than the mandated 62-day timeframe. Further, processing times for non-disability retirements ranged from 23 days to 852 days. This indicates that regardless of the type of retirement application, significant delays in processing these applications occur.
In its response, MSRB indicates that it makes available to pending retirees an advance benefit payment of up to 50% of their expected initial benefit payment if the benefit payments have not been initiated 45 days after their retirement date. However, during our audit, we analyzed participation in this program and found that only 123 (2%) of the 6,032 new retirees in our population received advances.
MSRB has also recently implemented a monthly accelerated payment program. OSA believes that establishing this program was a prudent measure to help retirees meet their financial needs while waiting to receive their retirement benefits.
Based on its response, MSRB is taking some measures to address our concerns in this area. We urge MSRB to fully implement our recommendations.
|Date published:||January 6, 2021|