Disability Pension Issue Continues To Fester [Courant]

June 19, 2015

Retirement Panel Is Told That Expensive Disability-Pension Issue Remains Unresolved

Hartford Courant

HARTFORD — A major issue concerning eligibility for state disability pensions — which state auditors said this week might already have cost the state millions in unwarranted payments to recipients who are no longer eligible — remained unresolved Thursday after it was presented to the State Employees Retirement Commission.

Comptroller Kevin Lembo had asked the retirement panel to address the matter at its Thursday meeting; he said that a dispute between state employee unions and the Office of Labor relations has left retirement officials without a clear standard on which to re-examine the continued eligibility of former state employees for disability pensions every 24 months.

Lembo’s office runs the state employees’ retirement plan, and auditors Wednesday had criticized the comptroller’s failure in the past two years to conduct the mandatory 24-month eligibility evaluations — saying that it “could have resulted in millions of dollars in payments to retirees who were no longer entitled to disability retirement.”

But Lembo responded that his office’s retirement division cannot conduct those re-evaluations until labor and management resolve a dispute over a key eligibility standard, adding that his office has been urging them to deal with the issue for two years.

At Thursday’s meeting, Lisa Grasso Egan, the Malloy administration’s chief of labor relations, said that her office is still negotiating the issue with a coalition of state employee unions. “These matters are for collective bargaining, and we will provide an update when there is a resolution to those issues,” Egan, who is a member of the retirement commission, told her fellow panel members. “We would hope that there will be [a resolution] in short order, but there’s a process in collective bargaining, so I am not inclined to give more of an update on that at this time.”

State employees are allowed to receive disability retirements if they can no longer do the job they were hired for, and are incapable of performing some other “suitable and comparable” state job. Lembo’s office started using a stricter definition of “suitable and comparable” two years ago, which the auditors said “resulted in a significant increase in the denial of benefits” compared to denials under the previous standard. This sparked a dispute with employee unions — which Lembo says must be resolved via collective bargaining or action by the legislature.

Another issue is “offsets” against disability pension payments to retirees who make income from non-state employment; auditors said that Lembo has not been reducing disability pension payments on the basis of retirees’ receiving private employment income. Lembo responded that he doesn’t have the legal authority to do anything differently.

Egan said that both issues are part of the ongoing discussion with employees’ unions. “The state has been engaged with the union on the issue of defining a standard for ‘suitable and comparable,'” she said, “and we are also engaged on the issue of offsets.”

Meanwhile, a representative of Treasurer Denise Nappier expressed concern at the meeting about the matters remaining unresolved. “As you know, Treasurer Nappier is the principal fiduciary of the pension plan and as such she must ensure the proper use of pension assets,” said Lee Ann Palladino, chief investment officer for Nappier.

“Both the auditors as well as the comptroller have raised issues that require immediate resolution, and, specifically, we believe that there must be clarification of the governing statutes and how they are to be interpreted, as well as the goals and accountability of the commissions, the office of the comptroller, comptroller and … any other entities that may be involved,” Palladino said.

She said what’s needed is “assurance that there is a plan of action in place to address these issues, and that going forward there is a clear process” for the administration of retirement benefits.

On Wednesday, Republicans had jumped on the auditors’ letter, which was the result of a “whistleblower complaint” from a former comptroller’s office employee. Sen. Michael McLachlan, R-Danbury, called it “Exhibit A of why our state is going broke.”

Senate Minority Leader Len Fasano, R-North Haven, said: “At a time when Connecticut is facing an incredibly challenging budget, it’s even more infuriating to learn about these irresponsible, inexcusable errors. 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.”

On Thursday, Republican House Minority Leader Themis Klarides sent a letter to Democratic Speaker of the House J. Brendan Sharkey, asking that the disability pension issue be taken up in the special legislative session expected to be called for June 29 and 30. “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,” she wrote.

Thursday’s retirement commission meeting was the first for its newly appointed chairman, Peter L. Adomeit of West Hartford, an attorney, arbitrator and law professor. He said it was “quite an honor to be sitting here.”

Adomeit, 74, replaces Peter Blum, who for 26 years headed the 15-member panel that oversees benefits paid to tens of thousands of former state employees.

The commission includes seven members representing unions, seven who represent management and a “neutral” 15th member who serves as chairman. The labor and management members recommended Adomeit to Gov. Dannel P. Malloy, who appointed him to serve until May 2017 or until a successor is named.