[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
IS OPM PROCESSING FEDERAL WORKER PENSION CLAIMS ON TIME?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON FEDERAL WORKFORCE,
US POSTAL SERVICE AND THE CENSUS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 9, 2013
__________
Serial No. 113-24
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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81-283 WASHINGTON : 2013
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas MARK POCAN, Wisconsin
DOC HASTINGS, Washington TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Federal Workforce, U.S. Postal Service and the Census
BLAKE FARENTHOLD, Texas, Chairman
TIM WALBERG, Michigan STEPHEN F. LYNCH, Massachusetts,
TREY GOWDY, South Carolina Ranking Minority Member
DOUG COLLINS, Georgia ELEANOR HOLMES NORTON, District of
RON DeSANTIS, Florida Columbia
WM. LACY CLAY, Missouri
C O N T E N T S
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Page
Hearing held on May 9, 2013...................................... 1
WITNESSES
Mr. Patrick McFarland, Inspector General, U.S. Office of
Personnel Management
Oral Statement............................................... 4
Written Statement............................................ 7
Mr. Kenneth Zawodny, Associate Director, Retirement Services,
U.S. Office of Personnel Management
Oral Statement............................................... 16
Written Statement............................................ 18
Ms. Valerie C. Melvin, Director, Information Management and
Technology Resources Issues, U.S. Government Accountability
Office
Oral Statement............................................... 27
Written Statement............................................ 29
Mr. George Kettner, President, Economic Systems, Inc.
Oral Statement............................................... 45
Written Statement............................................ 47
Mr. Joseph A. Beaudoin, President, National Active and Retired
Federal Employees Assoc. (NARFE)
Oral Statement............................................... 64
Written Statement............................................ 66
IS OPM PROCESSING FEDERAL WORKER PENSION CLAIMS ON TIME?
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Thursday, May 9, 2013
House of Representatives,
Subcommittee on Federal Workforce, U.S. Postal
Service, and the Census,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 9:30 a.m., in
Room 2247 Rayburn House Office Building, Hon. Blake Farenthold
[chairman of the subcommittee] presiding.
Present: Representatives Farenthold, Lynch, Norton, and
Clay.
Staff Present: Molly Boyl, Parliamentarian; Daniel Bucheli,
Assistant Clerk; Steve Castor, General Counsel; John Cuaderes,
Deputy Staff Director; Adam P. Fromm, Director of Member
Services and Committee Operations; Linda Good, Chief Clerk;
Jennifer Hemingway, Deputy Policy Director; Jaron Bourke,
Minority Director of Administration; Lena Chang, Minority
Counsel; Adam Koshkin, Minority Research Assistant; Safiya
Simmons, Minority Press Secretary; Mark Stephenson, Minority
Director of Legislation.
Mr. Farenthold. The subcommittee will come to order. Good
morning.
As is traditional with all the committee and subcommittee
meetings of the Oversight and Government Reform Committee, I'd
like to begin today by reading the Oversight Committee's
mission statement. We exist to secure two fundamental
principles. First, Americans have a right know that the money
Washington takes from them is well spent. And second, Americans
deserve an efficient, effective government that works for them.
Our duty on the Oversight and Government Reform Committee is to
protect these rights. Our solemn responsibility is to hold
government accountable to the taxpayers because taxpayers have
a right to know what they get from their government. We will
work tirelessly, in partnership with citizen watchdogs, to
deliver the facts to the American people and bring genuine
reform to the Federal bureaucracy. This is the mission of the
Oversight and Government Reform Committee.
And I now will recognize myself for an opening statement.
Two and a half million retired Federal workers and their
survivors rely on their pension checks to make ends meet every
month. The Office of Personnel Management, who administers
these checks, has done it the same way since 1987. This lack of
modernization has resulted in the backlog of 30,000 claims,
while the OPM averages $100 million each year in payments to
deceased annuitants and survivors. Thousands of manila folders,
imaged files, and a COBOL system patched together with
spreadsheets makes up the benefit processing operation at OPM.
It's not an effective or organized operation, just more
evidence of the Federal Government's poor IT record. As I often
say, I don't think the Federal Government can compute their way
out of a paper bag.
I applaud the hard work that's been put in over the past
few years to reduce the backlog and speed claim processing.
Unfortunately, however, I think the need for meaningful reform
exists. It needs to be more than hiring additional staff to
support an outdated process. There is no doubt the system needs
reform. In a time of cuts, it is important that we, as
congressional watchdogs, ensure you're working on a long-term
plan to make the process as efficient and effective as
possible.
While the President's budget recommends $2.6 million to
fund a case management system, the budget is short on detail
and provides little guidance on how the OPM will achieve this
modernization program. In the past, we've seen hundreds of
millions of dollars wasted in Federal IT spending, yet reform
seems to be very lacking. The clock is ticking. OPM has less
than 60 days to achieve its short-term goal of reducing the
backlog and processing 90 percent of the claims within 60 days.
In the long term, OPM must drive down operational costs and
use technologies to make the program more efficient. It must
respond to questions by workers awaiting their pension, and it
must also eliminate payments to dead people and must reduce
waste, fraud, and abuse. OPM needs to work smarter, save money
through technology and streamlining, and deliver results.
Failure to do so sends the wrong message to those who work for
the Federal Government. Federal workers deserve better at the
end of their career.
At this point, I'll yield to the ranking member for 5
minutes, Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman. I appreciate you
calling this hearing. It's an important one and also very
timely.
I think it's important to evaluate the progress made by the
Office of Personnel Management in addressing the backlog of
Federal retirement claims since we last had a hearing on this
issue in November of 2011. As I said, this is a timely hearing.
This week is Public Service Recognition Week. Federal employees
devote their lives to serving the public and this country, and
I think that one of the ways that we can honor them is by
making sure that when they do retire, they'll be able to
collect their pensions, and do so in a timely manner. This is
not just a matter of principle. I am keenly aware of the
financial hardship that a backlog and long delays in claim
processing cause some of our Federal retirees.
I want to thank OPM for making some progress in elimination
of retirement claims backlog. They've made it a top priority.
And I want to thank them for succeeding in at least bringing
down the backlog from a high of 60,000 claims in January of
2012 to 30,000 claims at the beginning of this month. I commend
OPM's employees for their hard work and dedication in reducing
the backlog. It appears that OPM has met or exceeded the
agency's processing goals, from the numbers I see, since it
issued its strategic plan in January of last year. And they did
accomplish this despite some unanticipated increases in
retirement applications during the first quarter of this year.
However, I believe that this problem will continue to
plague OPM and our Federal retirees if we continue to rely upon
a paper-based, manual processing of claims. We do need a long-
term solution to that problem. Fortunately, I know that OPM
recognizes that and is seeking to develop information
technology solutions on an incremental basis. Given OPM's past
unsuccessful efforts in automating the claims process, this
incremental approach makes sense to me.
Solving this problem is not going to be easy, nor is it
going to be quick. It will require some resources and support
from Congress. But there lies a significant political problem.
Congress requires across-the-board budget cuts in the Budget
Control Act. Sequestration may have a negative effect on the
ability of OPM to meet its goal of eliminating this backlog by
this July and to have sufficient funding to implement its other
initiatives.
Just when sequestration imposes across-the-board cuts at
OPM, early retirement and buyouts as a result of Postal Service
restructuring or the wave of retirements from Federal retirees
seeking to retire before Congress imposes any additional
changes to pay or benefits, will surely add to the backlog
problem.
I do want to thank you, Mr. Chairman. I appreciate the
opportunity to examine the status of OPM's retirement claims
processing, and I look forward to hearing from our members. And
I yield back.
Mr. Farenthold. Thank you very much, Mr. Lynch.
Mr. Farenthold. Just a couple of housekeeping matters
before we get underway. Votes are scheduled on the House floor
at 10:30. In the event we are not finished by then--we may very
possibly be finished by then--if we're not, we will take a
recess while the members go and vote, and we'll return. So I
did want to let everybody know that that was a possibility.
Also, as is normal with the committee, members will have 7
days to submit opening statements for the record.
Mr. Farenthold. At this point we will now recognize our
panel. The Honorable Patrick E. McFarland is Inspector General
of the Office of Personnel Management.
Welcome, Mr. McFarland.
Mr. Ken Zawodny. He's the Associate Director for Retirement
Services at OPM.
Welcome to you as well.
Ms. Valerie C. Melvin is Director of Information Management
and Technology Resource Issues for the U.S. Government
Accountability Office.
Welcome to the subcommittee.
And then we have Dr. George Kettner. He's founder of
Economic Systems, Inc. and Mr. Joseph Beaudoin. He is the
national president of the National Archives and Retired Federal
Employees Association.
Thank you for your service as a Federal employee, and
welcome.
Pursuant to the rules of the committee, all witnesses will
be sworn. Would you please rise and raise your right hand?
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
Let the record reflect that all witnesses answered in the
affirmative.
Thank you, and be seated.
As I was saying, we want to get thoroughly to the heart of
this issue where we fully understand it and have fully
developed a record that other Members of Congress may and the
public may refer to as we work towards a solution in
streamlining our government. That being said, our normal
procedure is to allow each witness 5 minutes to give their
testimony. Your complete written testimony, we have and have
reviewed. We ask that you summarize it in 5 minutes.
You will see a little light system in front of you. Works
just like the traffic lights you see all around the city. Green
means go, yellow means get ready to stop, and red means your 5
minutes are up. Obviously, we'll allow you time to complete
your thoughts.
So we'll get underway with Mr. McFarland. You're recognized
for 5 minutes, sir.
WITNESS STATEMENTS
STATEMENT OF PATRICK MCFARLAND
Mr. McFarland. Good morning, Chairman Farenthold, Ranking
Member Lynch, and members of the subcommittee. My name is
Patrick McFarland. I am the Inspector General at the Office of
Personnel Management.
Thank you for this opportunity to speak to you. In these 5
minutes, I hope to capture the essence of my written testimony
with a brief statement regarding the retirement claims backlog
and then a more in-depth discussion about improper retirement
payments to deceased annuitants. But most importantly, I will
end by asking a favor of this committee.
I believe OPM may be well on its way to eliminating the
retirement claims backlog, although the recent news about
reductions in retirement program funding due to sequestration
may impact this endeavor. Based on the numbers reported, OPM
has reduced the backlog 38 percent in the 16 months since the
end of 2011, despite receiving many more claims than expected
in 2013. However, I have concerns based on our audit work
regarding the internal controls related to the tracking of the
inventory as well as the reduced accuracy rate for adjudication
of retirement claims. Nevertheless, it is clear that OPM has
made substantial progress.
OPM has enormous responsibilities to the rest of the
Federal Government. OPM has good, dedicated personnel like Ken
Zawodny, presently wrestling with the daunting task of reducing
the retirement claims backlog. However, there is another task
that requires the same level of attention as the backlog, and
that is the improper payments made to deceased annuitants.
Retirement Services' everyday workload has subsumed what
were already weak management directives. It has become
management by happenstance rather than management by design and
leadership. GAO's standard for internal controls in the Federal
Government states that management is responsible for developing
control activities, which are the policies, procedures,
techniques, and mechanisms that enforce management's
directives. Control activities occur at all levels and include
a wide range of activities, such as approvals, authorizations,
verifications, reconciliations, and the creation and
maintenance of related records which document execution of
these activities.
OPM's improper payment strategic plan is replete with
background root causes, measurements, and goals to be achieved
in an effort to curb improper payments. However, what is not
identified is indeed the missing link to success: It is full
and unwavering leadership commitment to project management with
the goal of finally stopping--finally stopping--egregious,
improper payments. Although the OPM employees assigned to this
work care and try hard, they do not always have the particular
skill sets, tools, resources, and most importantly the
management structure to be successful.
If OPM had made an earlier commitment to embrace the
concept of a lifecycle approach with careful thought devoted to
each step, from beginning to end, OPM would have a prescription
for effective and efficient corrective action and we would not
be here discussing improper payments. Today, some of our
simplest and routine questions cannot be answered by OPM
management regarding improper payments.
Illustrative of poor project management is the handling of
the 1099-R Project. The Internal Revenue Service requires that
OPM annually send each annuitant a form 1099-R, which reports
the amount of the annuity received during that year. Several
thousand of these forms are returned to OPM each year by the
Postal Service marked undeliverable. One of our prior
recommendations was that OPM should review these returned forms
in an effort to determine if they were undeliverable because
the annuitant was deceased.
OPM began to implement this recommendation starting with
form 1099-R for the 2009 tax year, which were mailed in January
2010. More than 33,000 forms were returned to OPM deemed
undeliverable. OPM began to compare these names to the Social
Security Administration's death master file and take
appropriate follow-up actions. But here's the problem: Three
years later, OPM still has not completed this work. Moreover,
although OPM received and collected the returned forms mailed
in January 2011, January 2012, and January 2013, it has not
taken any further action on these forms. Consequently, OPM now
has 3 more years of returned 1099 forms that have not been
addressed.
In closing, here's the favor I would ask of the committee.
Actually, the favor is for the taxpayer. I ask that Congress
work with our office to explore various corrective measures to
hold OPM accountable in this area for greatly improving its
performance in a very deliberate, structured, and methodical
way. Our work together could potentially produce a set of best
practices for all improper payments in the Federal Government.
Due to the millions of dollars of taxpayer funds that are
at stake, I strongly believe that such a collaboration with
your staff is absolutely necessary to ensure that the detection
and prevention of improper payments receive the sustained
attention and effort that it deserves and does not once again
fade into the background.
Thank you.
Mr. Farenthold. Thank you, Mr. McFarland.
[Prepared statement of Mr. McFarland follows:]
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Mr. Farenthold. And I'm sure you can count on this
subcommittee, in particular, and the entire committee. We have
a great relationship with the inspector general community
throughout the government, and you can count on us to work with
our fellow watchdogs. And we appreciate your testimony.
Mr. McFarland. Thank you.
Mr. Farenthold. Mr. Zawodny, you're recognized for 5
minutes.
STATEMENT OF KENNETH ZAWODNY
Mr. Zawodny. Thank you. Chairman Farenthold, Ranking Member
Lynch, and members of the subcommittee, today I'd like to
discuss OPM's progress in reducing the backlog of Federal
retirement claims, as well as the challenges of developing a
21st century customer-focused retirement processing system.
OPM is responsible for processing over 120,000 retirement
applications a year for Federal employees from all three
branches of the Federal Government and dozens of independent
agencies and commissions. OPM also handles post-retirement
transactions for the 2.5 million annuitants, survivors, and
their families.
In January 2012, OPM released and began implementation of a
strategic plan to reduce the unacceptable backlog of retirement
claims, and we remain focused on the goal of adjudicating 90
percent of the applications within 60 days, starting in July of
2013.
Our strategic plan consists of four pillars. One, people.
Two, productivity and process improvement. Three, partnering
with agencies. And four, partial, progressive IT improvements.
All four of these pillars are in action, and we were able to
reduce the claims inventory by 57 percent and reduce the
average processing time for an application from 156 to 136 days
last year.
However, over the first 4 months of this year, OPM
experienced significant increases in the number of applications
received. In January through April of this year, OPM received
almost 60,000 new applications, approximately 43 percent more
than we received at the same time period last year and 51
percent more than we had projected. Still, the efforts of our
employees, improved process changes resulted in a record number
of applications being processed during that period.
Last year we added to staff to the claims adjudication
process as called for in our strategic plan. The new employees
have been fully trained and have increased our capacity to
improve timeliness and production in claims processing. We
continue to achieve gains in efficiency in the pending work
through productivity and process improvements. These
improvements have occurred as a result of our work with the
Navy's Lean Six Sigma team and an ongoing Lean Six Sigma review
in other parts of retirement services.
Reducing the retirement claims backlog also requires OPM to
work with agencies that prepare the applications for their
employees to improve the accuracy and completeness of those
applications. Last year, we developed an agency audit process
designed to analyze applications sent to us by agencies so that
we can better track and report on errors. We use these results
to work with agencies to reduce incomplete, inaccurate
applications.
In our strategic plan we identified the need to modernize
our IT infrastructure incrementally, employing a cost-effective
and efficient transition away from paper. Working with
stakeholders, we are establishing the capability of gathering
electronic data from the applicant and sending it to the
benefit calculator. Our Retirement Services online system
empowers retirees to view, add, and update their information
online. This system has over 25,000 visits per week, and over
3.2 million transactions were processed last year alone.
We requested funding in our 2014 budget to begin the
development of a case management system for the centralized
tracking of, and reporting on, retirement applications. This
modest investment begins the process of upgrading to an
automated system, eventually reducing the amount of time
necessary to process retirement claims.
Government-wide fiscal challenges have ramifications for
maintaining the progress made on retirement processing as well
as future plans for improvements. Due to sequestration, OPM was
required to change some of our business operations for
Retirement Services. At the end of April, all overtime for
employees working in Retirement Services was suspend. Last
year, overtime enabled processing of over 34,000 additional
claims, roughly 26 percent of the total production. We also
reduced the hours of our call center, which receives
approximately 40,000 calls and thousands of pieces of
correspondence each week.
Our desire is that improvements developed over the past
year will offset some of the adverse effects of these actions.
But it saddens me to report that retirees may still have to
wait.
Finally, we are working to reduce the number of improper
annuity payments and increase recovery of overpayments. Last
year the rate of improper payments for the federal retirement
program was approximately one-third of 1 percent of the total
benefits disbursed, and almost 72 percent of the improper
payments identified have been recovered.
OPM has made substantial progress in reducing retirement
claims inventory. We understand that reducing the claims
inventory is about our commitment to dedicated public servants
and to their family members, and I know that delays cause
personal and financial hardships. In recognition of our goal to
honor their service, we are continuously developing a 21st
century customer-focused retirement processing system that
adjudicates claims in a timely and accurate manner.
I am proud of the Federal employees I work with, and I look
forward to addressing your concerns and questions you have
today. Thank you.
Mr. Farenthold. Thank you very much.
[Prepared statement of Mr. Zawodny follows:]
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Mr. Farenthold. Ms. Melvin, you're recognized now for 5
minutes.
STATEMENT OF VALERIE C. MELVIN
Ms. Melvin. Good morning, Chairman Farenthold, Ranking
Member Lynch, and members of the subcommittee. Thank you for
inviting me to testify at today's hearing on OPM's system for
processing Federal employee retirement benefits.
The use of information technology is integral to carrying
out this important responsibility, and for over 2 decades OPM
attempted to modernize the retirement process by automating
paper-based functions and replacing its antiquated information
systems. However, as you've alluded to, the agency faced many
challenges in managing its modernizations efforts and they were
largely unsuccessful. Reports that we previously issued on the
agency's efforts to plan and implement a modernized system
highlighted a long history of initiatives that did not yield
the intended results.
At your request, my testimony today summarizes our findings
on these efforts and the challenges OPM has faced in managing
them and describes the agency's more recent action to improve
the retirement process.
Overall, our studies found that OPM was hindered by
weaknesses in several key management disciplines that are
essential to successful IT modernizations. These included
project management, risk management, and organizational change
management. For example, in reporting on the agency's efforts
in 2005, we noted that while it had defined major retirement
modernization system components, OPM had not identified the
dependencies among them, thus increasing the risk that delays
in one project activity could hinder progress in others. OPM
also did not have a process for identifying and tracking
project risk and mitigation strategies on a regular basis, and
it did not have a plan that would help users transition to
different job responsibilities after deployment of a new
system. These deficiencies existed over numerous years in which
the agency planned, analyzed, and redirected the program but
without delivering the modernized capabilities.
In 2008, as it was on the verge of deploying a system, we
noted other management concerns and offered recommendations for
improvement. Specifically, test results 1 month before
deploying a major system component showed that it had not
performed as intended. Also, defects and a compressed testing
schedule increased the risk that the deployed system would not
work as planned. Further, the cost estimate that OPM had
developed was not supported by documentation needed to
establish its reliability. And finally, the baseline against
which OPM was measuring progress did not reflect the full scope
of the project, meaning that variances from planned performance
would not be identified.
OPM nonetheless deployed a limited version of the
modernized system in February 2008, but the system did not work
as expected and the agency suspended its operation and began
restructuring the modernization program.
In April, 2009, we again reported on the initiative, noting
that the agency still remained far from achieving the
capabilities it had envisioned. Significant weaknesses continue
to exist in the previously identified areas, and we noted
additional weaknesses as well. Specifically, OPM lacked a plan
describing how the program would proceed after terminating the
earlier systems contract and it lacked a fully functioning
oversight body to monitor its modernization projects.
OPM agreed with all of our recommendations and took steps
to address them. However, it terminated the retirement
modernization program in February 2011 and subsequently stated
that it did not plan to undertake another large-scale
modernization effort.
In January 2012, the agency released a plan describing
intended improvements to retirement processing through targeted
incremental steps such as hiring new staff and working with
agencies to improve data quality and intended IT improvements
to automate retirement application processing. As has been
stated, the agency's goal is to be able to process 90 percent
of new claims within 60 days by July of 2013.
However, while OPM is taking these steps and has reported
progress toward meeting its goal, it has not yet addressed the
fundamental question of how it intends to modify the many
legacy systems that currently support the retirement process.
Moreover, even as it implements this plan, it is essential that
the agency fully address the deficiencies and institutionalize
the IT management capabilities highlighted in our studies.
Until it does so, OPM will not be effectively positioned to
ensure the success of any future retirement modernization
projects.
Mr. Chairman, this concludes my oral statement, and I would
be pleased to respond to your questions.
Mr. Farenthold. Thank you very much, Ms. Melvin.
[Prepared statement of Ms. Melvin follows:]
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Mr. Farenthold. Dr. Kettner.
STATEMENT OF GEORGE KETTNER
Mr. Kettner. Thank you for the opportunity to appear before
the committee on the subject of OPM processing of retirement
claims.
In order to establish our credibility to speak today in
front of the subcommittee, I would like to first describe our
experience and capabilities relevant to the discussion. My
company, Economic Systems, Inc., has been in the Federal
retirement calculation and claims processing business for more
than 20 years, and has a longstanding association with OPM and
many Federal agencies in connection with retirement claims
processing and related issues. Today, we operate a cloud
service provider retirement system that services approximately
120 agencies, both large and small, throughout the Federal
Government. Our retirement system provides automated tools for
case tracking, filling forms electronically, and importing data
from agency personnel and payroll systems. Economic Systems
provides agencies with tools that facilitate the processing of
retirement application packages that are sent to OPM for
adjudication, using a wizard-like approach similar to how Turbo
Tax works for preparing tax returns.
We have a long history of working with OPM, which includes
developing the original CSRS-FERS transfer model in 1985-1986
and the Federal Employee Retirement Coverage Correction Act,
referred to as FERCCA, decision model. We subsequently
processed thousands of FERCCA cases on behalf of OPM using this
tool.
We commend OPM for its recent accomplishments of reducing
the backlog of unprocessed claims. We agree with OPM's decision
to take an incremental approach toward modernizing the
retirement system, and we agree with GAO's assessment of the
challenges that OPM faces in the pursuit of modernization. What
we would like to add to this discussion is that the Federal
retirement system is a large and very complex system that
requires not only an incremental approach, but a unified design
developed in partnership with subject matter experts who truly
understand Federal retirement and Federal human resource
systems.
The complexities of the Federal retirement system affect
all participants in the retirement process: employees, agency
HR staff, OPM, and those in the vendor community who serve
these groups. These complexities increase agency errors in the
submission of retirement packages to OPM, causing delays at
OPM.
Another challenge is that the business processes upon which
the current retirement system is built are obsolete, paper-
based, and labor intensive.
All of this notwithstanding, we believe that there are
near-term incremental opportunities that OPM and the agencies
could employ that would enable OPM to make a significant
improvement in claims processing from a technology standpoint,
as well as managing their workforce.
Reviews and audits of the previous failed modernization
efforts have focused primarily on the failures of project
management and testing. Little or no review has focused on the
actual IT design and engineering of the failed effort. The
success of systems with enormous business rule complexity is
ultimately dependent on the technical design, not just project
management.
Economic Systems has developed a proven Federal retirement
calculator by combining subject matter expertise and adaptable
engineering. Adaptable engineering allows the retirement system
to accommodate change requirements such as the FERCCA rules and
regulations. During the FERCCA project, OPM vetted the Economic
Systems retirement calculator, and this collaboration produced
a calculator that was suitable for processing FERCCA claims.
This was accomplished with a software development budget that
was a fraction of taxpayer money spent on past vendors who
failed.
A key reason for past failure at retirement modernization
is lack of knowledge of subject matter complexity on the part
of the previous IT contractors for OPM. For the most recent RSM
effort, the vendors were not subject matter experts in Federal
retirement. We believe that a prudent course would be to
leverage the subject matter expertise and tools that Economics
Systems has and expand our adaptive engineering approach.
Economic Systems has developed a next-generation retirement
calculator that is the centerpiece of a full-service component
across all aspects of the Federal retirement process. This
includes not only serving our existing agency customer
requirements, but also claims adjudication and ongoing retiree
benefits adjustments.
Economic Systems products can replace OPM's legacy
retirement calculation systems. We would immediately start to
replace the systems required for initial claims adjudication.
The Economic Systems calculator is not tied to any specific
user interface or database and can be integrated into a
properly designed larger modernization road map. Because so
many Federal agencies are using our retirement system, we can
readily transfer data electronically to OPM. This alone would
greatly enhance OPM's efficiency.
With our new calculator in place at OPM, we can
incrementally replace other systems for retiree employee
processing calculation. This can be accomplished at a much
lower cost than the past failed projects and in a shorter
period of time.
Economic Systems provides management retirement software to
agencies as well as retirement software. We have had a very
positive working relationship with the USAJOBS program at OPM.
We believe that the retirement program could draw valuable
lessons from this program as well. OPM's winning strategy for
USAJOBS is to be in partnership with the agencies and the
vendor community to develop solutions for the hiring process.
In our view, the open communication model in USAJOBS should be
followed in OPM's retirement processing system as well. With
integration between our retirement calculator and OPM's
retirement systems, OPM could eliminate a great amount of
duplicate data entry.
That concludes my testimony.
Mr. Farenthold. Thank you very much.
[Prepared statement of Mr. Kettner follows:]
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Mr. Farenthold. Mr. Beaudoin.
STATEMENT OF JOSEPH A. BEAUDOIN
Mr. Beaudoin. Good morning, and thank you for inviting me
to testify on behalf of the 5 million Federal workers and
retirees represented by NARFE, where I have the privilege of
serving as president. I appreciate this opportunity to discuss
Federal retirement annuity processing.
Last Congress, both this subcommittee and its Senate
counterpart recognized there were issues with the processing of
Federal retirement annuity claims and held hearings drawing
attention to the problem. As the association representing those
directly affected by these problems, I would like to extend our
thanks to the subcommittee for addressing this issue. We
further appreciate this follow-up to ensure progress is being
made.
Last February, I testified before the Senate that NARFE was
receiving hundreds of calls from our members complaining that
their interim annuity payments were too low, they were waiting
too long to receive their full annuity payments, and they were
unable to communicate with OPM to check the status of their
claims. Some had understandably complicated claims that took
longer than the average. They worked for several Federal
agencies, they had a break in service, they had both military
and civilian service. However, even in instances of fully
complete claims, with little to no errors, wait times were far
too long. There was a major problem, to say the least.
To their credit, OPM acknowledged what our members were
experiencing, recognizing that, ``Federal employees face
unacceptable delays in receiving retirement benefits after
years of honorable service to the Nation.''
In January 2012, there was a backlog of over 61,000 claims
and the average time to process a claim was over 5 months. Many
claims, however, took far longer to process. It was in this
context that OPM developed a strategic plan to improve the
processing of retirement benefit claims, which they released in
January 2012, promising to do better.
Let's give credit where credit is due. OPM laid out a
strategic plan that predicted improvements in claims processing
through additional staff, longer call center hours, and better
communication with agencies. OPM implemented the plan as
intended, and it has worked. The inventory of claims has
dropped to roughly 30,000. OPM has outpaced its projections for
claims processing every month, with the exception of December
2012.
Yet, as a result of much higher than expected retirements
in February and March, the claims inventory is higher than the
projected. In fact, in 3 of this year's first 4 months the
number of Federal employees filing retirement claims outpaced
OPM's projections. Given the ongoing retirement wave, this
trend is likely to continue. With overtime reductions planned
as a result of budget cuts, it now seems doubtful that OPM will
be able to reach the goals of its strategic plan, despite the
substantial progress that has been made. This is a huge setback
in an otherwise successful story.
As flight delays made frustratingly clear to many Members
of Congress, you need a strong, capable, and fully staffed
Federal workforce for the government to operate and serve its
customers. Unfortunately, while Congress passed a Band-Aid fix
to end the continuation of air traffic controller furloughs, it
did not fix the remainder of the less publicly visible problem
being caused by sequestration.
OPM recently announced that it was forced to reduce its
call centers hours and halt overtime for employees processing
annuity claims. This is very disappointing news. Previously,
one of our most significant complaints with OPM was that
retirees were unable to reach someone on the phone. Reducing
call center hours threatens to bring a return to this problem.
Furthermore, the use of overtime may have been one of OPM's
most effective tools in reducing the backlog.
By taking that away, we find it hard to see how OPM will be
able to handle the large wave of retirements expected to occur
in the very near future. Postal Service buyouts, combined with
a general sentiment among retirement-eligible workers to retire
before Congress asks for more financial sacrifices from them,
there are likely to be more retirement claims before there are
less.
There is still an inventory of more than 30,000 claims and
waits continue to be too long. The expected wave of Federal
retirements threatens to reverse the progress that has been
made. The force reduction in overtime and call center hours
could not come at a worse time. We implore the Congress to take
notice of the very real effects that austerity budgeting is
having on government services, including the ones on which our
career civil servants rely.
As we sit here during Public Service Recognition Week,
today is a perfect time to ensure that we treat our retiring
public servants with the recognition they deserve for their
careers of service.
Thank you again for providing me the opportunity to share
NARFE's views.
Mr. Farenthold. Thank you very much, Mr. Beaudoin.
[prepared statement of Mr. Beaudoin follows:]
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Mr. Farenthold. We'll now go to questioning. I'll recognize
myself first for 5 minutes. I'll start with Mr. Zawodny.
For more than 2 decades, OPM has failed to meet its goal to
improve retirement system claim processing. Will you all be
able to meet your commitment to reduce the backlog by July of
2013? Are you going to be able to get to the 90 percent within
60 days?
Mr. Zawodny. Our goal, sir, is at the end of July of 2013
we'll be able to process 90 percent of our cases within 60
days. The recent setbacks, the unexpected amount of Postal
Service retirements in February and March have slowed us down a
bit. The unexpected reduction in overtime also has put us back
a bit, perhaps. It's still too early for me to really
understand what that impact is going to be, since it just
occurred about 10 days ago. Within the next 30 days, after we
have a full understanding of what our capabilities are without
the use of overtime in processing our workload, I'll be better
able to judge and project out what our capabilities are going
to forecast up until the end of July.
Mr. Farenthold. So let's talk just a little bit about what
the process is for doing this. So I'm a Federal employee. I'm
ready to retire. I go talk to my H.R. Person and they start the
paperwork.
Mr. Zawodny. Yes, sir.
Mr. Farenthold. Now, depending on what agency, they may or
may not use Dr. Kettner's system. But they fill out all this
paperwork and they just put it in an envelope and mail it to
you? What percentage comes by mail, what percentage comes
electronically?
Mr. Zawodny. Each time an individual retires from any one
of the three branches, in most instances, and independent
agencies, when they elect to retire and the day that they walk
out the door, those agencies' H.R. Offices and the payroll
providers send us electronic transmission that the individual
has left the building. At that time we start them in interim
pay immediately. It provides data elements on the individual--
name, Social Security number, and some basic information--so we
can start that person in the interim pay immediately, even
before we receive the retirement application.
Mr. Farenthold. Okay.
Mr. Zawodny. Then the agencies follow up with us to provide
the retirement application and all of the other documents
required, such as election forms for survivor benefits, health
insurance election forms, changes that they may make with
regards to----
Mr. Farenthold. All right. So there are all these
questions. I understand it's complicated, whether you're in the
military, whether there were breaks in services, different
agencies. You calculate everything differently.
How much time is spent re-keying that data? Is there a lot
of data entry? Where is the big time? Is it is looking at it,
doing the math, is it getting the information? I mean, what
takes so long? To me, it just seems like it's something--and I
guess I grew up in the Turbo Tax era; you just check the boxes
and it spits out the form with the amount. Do you have not have
a system that does that? I mean, what else do you do that makes
it take so long?
Mr. Zawodny. Well, sir, the length of time it takes to
actually adjudicate a case is not that long. Getting it into
the hands of the adjudicator to ensure that the case has gone
through our refined process of ensuring that the case is full
and complete, we have all the information there to adjudicate
the place and put them into final pay, as well as ensuring that
the information is there that is going to maybe require post-
adjudicative work, because remember, the individual comes to
us, we have them for the rest of their life and the rest of
their survivor's life.
Mr. Farenthold. All right. So what's post-adjudicative
work? They think they're not getting enough and there's a
hearing process? Is that----
Mr. Zawodny. No, sir. The adjudication process consists of
the legal administrative specialist reviewing the entire
document, the retirement application; ensuring all the
information is there; ensuring that the service history is
continuous and complete, that there's no missing periods of
time. Once that information is full and complete, then they
adjudicate the case, meaning they can put it into our annuity
system, do the calculations, and render a final payment.
Mr. Farenthold. I guess it's just me having grown up in the
computer age. To me, this just sounds like something you key in
the data and, with very few exceptions, it ought to spit it
out. And when there's an exception, it turns it red on the
screen.
Mr. Zawodny. And it does, sir. All of the information gets
keyed in or gets placed into the system and those calculations
are done by our calculator, down to the penny.
Mr. Farenthold. And can't that be done by the agency or the
retiree just plugging it in on a Web site?
Mr. Zawodny. The agencies use various estimator tools, such
as Dr. Kettner had mentioned, but quite often the agency may
not have the full, complete service record of the individual.
If the individual has moved from different agencies----
Mr. Farenthold. So who gets you that information? The
individual then says--or the retiree says, okay, so, I'm with
OPM now, I'm retiring from OPM. Before that I was a
congressional staffer. Before that I was in the military. So
who gathers all that?
Mr. Zawodny. The agency is ultimately responsible for
compiling all that data and information and getting us a
complete record of the individual service history. But every
time an employee moves from agency to agency, that losing
agency transmits to us information about the service and the
time that they spent at that agency and we have it on file.
Mr. Farenthold. And you all keep that in the database----
Mr. Zawodny. Yes, sir, we do.
Mr. Farenthold. In the database or on paper?
Mr. Zawodny. Both, sir. It depends. Many of these systems
are very old----
Mr. Farenthold. Sure, some of them have been around for a
long time.
Mr. Zawodny. --before the systems were created. So we have
those records to refer to. Most of the information is
electronic, and we look through our systems to determine if we
have the complete service record on file.
Mr. Farenthold. I'm already out of time. I'm going to go to
my colleagues here. I probably do have another round of
questioning after we finish.
I'll recognize Mr. Lynch now.
Mr. Lynch. Thank you. I want to thank all the witnesses for
coming before the committee to help us with this work.
I'm a little bit concerned. I know we've got a bunch of big
problems here, systemic problems. But I did want to talk to Mr.
McFarland and Mr. Zawodny about the number of these--the number
of these claims--excuse me--checks that are going that are
misdelivered, 33,000 returns. How many checks actually go out?
This 33,000, what is that a percentage of? I know we've got 5
million retirees.
Mr. Zawodny. They are not the checks, sir. They are the
1099-R's. It's the----
Mr. Lynch. No, no, I know. You're doing that as a check, as
a check against whether people are receiving--whether they are
undeliverable or not. I understand that part. But you've got
30,000 1099s that came back undeliverable.
Mr. Zawodny. Correct, sir.
Mr. Lynch. How many did you send out?
Mr. Zawodny. Two-point-five million, roughly.
Mr. Lynch. Okay, 2.5 million. That was my question. Okay.
Out of 2.5 million, 33,000. So it's a very small number.
Mr. Zawodny. Yes, sir.
Mr. Lynch. But still, it's troubling, if we've got 33,000
forms going out and we're not addressing this. What are we
doing about this? I know you had a cross-check with Social
Security.
Mr. Zawodny. Yes, sir. That's the master file. Once a month
and down to the week now we cross reference our annuity roll
with the death master file from Social Security to see if
there's been reported deaths that might match up to our annuity
roll.
Regarding the 1099-R's are that are returned, when they are
returned to us the first thing we do is check our system to see
if there's been an updated address, that the individual may
have moved and it did not get forwarded, then we'll re-send
that out, which occurs quite often. In the case of these
33,000, we have spent roughly 5,500 hours and have gone through
all but about 4,000 so far, verifying that the individual has
either moved or it was a bad address or some misinformation and
have cleared all of those as not involved in any sort of fraud,
waste, or any other sort of discrepancy. The other 4,000 we are
still working to verify where the individual lives and what is
going on with those.
So far, of those 33,000 that were mentioned earlier, none
of them have matched up against the Social Security death match
file indicating that the individual has reported a death, at
least to the Social Security Administration, nor have we been
informed that the individual should no longer be subject to
annuity payments.
Mr. Lynch. Okay. Is there a death benefit for a Federal
employee. There are, right?
Mr. Zawodny. Life insurance, yes, sir. Or if the individual
is survived by a surviving member of the family and they have
survivor benefits, they could elect to get those as well.
Mr. Lynch. Yeah. Okay. Now we've got sequestration coming
up. I know you've made some significant headway in reducing the
backlog of claims. We've gone from 60,000 to 30,000, which is a
good deal. Now we're going to have the recent postal
retirements coming in. So that's going to kick up your business
again. And we've got sequestration is going to drive down the
number of hours that you're working on overtime, and that's
going to be problematic as well. Maybe furloughs. Are you
looking at that as well?
Mr. Zawodny. We are not at this time, sir. That's the
reason we took the overtime off and cut some of the call center
and other areas, so we can forego furloughs.
Mr. Lynch. Okay. Well, I guess what I want to know, is
there any flexibility for OPM to transfer or reprogram funds to
make sure that this top priority activity remains adequately
funded, you know, to keep your effort going here in the right
direction.
Mr. Zawodny. We are working. The Acting Director of OPM
right now is working with our Chief Financial Officer and all
the program offices within OPM to see how we can reprogram
moneys to meet some of the high priority goals within OPM.
Mr. Lynch. Can I ask you, I know that OPM picked up some
responsibility with respect to the Affordable Care Act.
Mr. Zawodny. Yes, sir.
Mr. Lynch. You're helping with establishing the exchanges,
is that what you're doing?
Mr. Zawodny. Yes, sir.
Mr. Lynch. How is that going?
Mr. Zawodny. To be honest with you, sir, that's not in my
program area of responsibility. So I'll get back to you on
that.
Mr. Lynch. Anybody on the panel here?
I just note that's a tremendous amount of responsibility as
well.
Mr. Zawodny. Yes, sir.
Mr. Lynch. And it may not be your area of expertise, but
it's sure something that we want to be concerned about.
Mr. Zawodny. Absolutely, sir.
Mr. Lynch. Okay. That's another mess waiting to happen.
All right. I'll yield back. I have about 2 seconds left.
Thank you. Appreciate it.
Mr. Farenthold. Thank you very much.
We'll go to Mr. Clay now. You're recognized for 5 minutes.
Mr. Clay. Thank you, Mr. Chairman. And let me thank the
witnesses for their testimony today.
OPM's retirement services strategic plan sets forth a goal
to eliminate a backlog of over 60,000 claims by July of 2013
and to process 90 percent of new claims within 60 days of
receipt from the agency. Since rolling out the strategic plan,
and with the exception of 2 months, OPM has met or exceeded its
claims processing goal. Despite a 40 percent increase in claims
since January, compared to the first 4 months of last year, OPM
was able to reduce its backlog from 61,108 claims in January of
2012 to 30,080 claims as of the beginning of this month. The
average time to process a new CSRS or FERS retirement claim was
reduced from 156 days as of January 2012 to 86 days as of the
end of April 2013.
Mr. Zawodny, I appreciate the progress made by OPM in
decreasing the claims backlog, but I am concerned that the
backlog of claims for more complicated cases, such as court-
ordered and disability benefits, have increased significantly,
from 3,483 to 7,618 claims, and from 5,611 claims to 6,536
claims, respectively. Can you tell me how OPM plans to address
the growing backlog for these complicated cases?
Mr. Zawodny. Yes, sir. Thank you, sir, for allowing me to
address your concerns. Both court-order and disability cases
are cases where there are multiple parties involved in the
review and completion of those cases. In both areas we've added
additional resources to those areas. In the disability, we have
a class of--we're training some LAS's, legal administrative
specialists, right now to handle the disability cases. They are
far more complex. They require a lot of interaction either
between the agency, the individual, their medical doctors and
medical teams to assure that we have enough information to
render the suitable disability retirement determination.
Regarding court-ordered benefits, we've hired paralegals to
help review the record amount of court orders, which consists
of not only divorce decrees that are submitted to us, but also
bankruptcies, garnishments, other court orders that impact a
Federal retiree and/or their survivor.
The court order workload that you mentioned is comprised of
a number of different areas. It includes not only the court
orders that pertain to current retirees or those who are
getting ready to retire, but also Federal employees are
responsible for submitting the court orders if they are still
an active Federal employee. For instance, if an individual
retires at their tenth year of service and gets divorced,
they're required to submit a court order of their divorce
decree to us so that we can have it on file in furtherance of
the retirement application if and when that may occur. That's
part of the review process as well.
What we have done to speed up that process is we have
removed from the overall picture in court orders just those
cases that pertain to current active Federal employees and
split those out from those who are currently ready to retire.
So we can have two different streams of work to try to drive
down that workload.
Mr. Clay. Based on monthly progress reports the committee
receives from OPM, claims less than 90 days old have grown. Mr.
Zawodny, why is OPM having difficulty meeting the second part
of its goal of processing 90 percent of new claims within 60
days of receipt?
Mr. Zawodny. Our most recent receipts from January through
March included not only our annual January surge, but also the
U.S. Postal surge. That created quite an unprecedented backlog
in our ability to process the claims quickly.
We believe--we did believe before the overtime was taken
away that we were going to be able to meet our goal in July of
2013. I still strongly believe that we are going to come very
close to meeting that and driving that back down to meeting our
goal of processing 90 percent of the cases within 60 days.
Mr. Clay. Thank you so much.
And, Mr. McFarland, would you care to comment on the
backlog status?
Mr. McFarland. I think the backlog status is something that
obviously has been going on for years. And my concern is not
necessarily with specifics as much as it is with the
overarching operation of the Retirement Service. There are so
many, from our perspective, from the IG's perspective, there
are just a carload of frustrations that we have with dealing
with these issues. The backlog as such is--it is what it is.
It's going to take a while to clear it up, and they are
certainly marching in the right direction. I don't have much
concern that they are not doing the right thing. I think they
are doing the right thing.
But the backlog--obviously inherent in the backlog is the
problem in the beginning, and it's been going on for years. And
now Mr. Zawodny's job is to clear it up. It's a big task. It's
almost an overwhelming task. But what we're concerned about is
the many frustrations and the lack of accountability, the lack
of leadership that we see in the retirement system for the many
issues that we deal with. And I'd be happy to go over some of
them with you if you'd like.
Mr. Clay. My time is up, Mr. Chairman.
Mr. Farenthold. I'll be happy to give you another minute or
so if you'd like to get that question answered.
Mr. Clay. Sure. Is it the sheer numbers or is it not enough
staff?
Mr. McFarland. No, I think what's happened here, this is my
personal feeling, what I think has happened is that this
backlog has caused a real problem for the other aspects of
Retirement Services. As an example, the lack of fraud referrals
to us. We are troubled about a decline in the retirement fraud
referrals produced by Retirement Services, as well as a lack of
timeliness in bringing suspected fraud to our attention.
In 2011, the OIG received only 30 retirement fraud
referrals from Retirement Services. But in 2010, we had
received 92 referrals. Then, on March 19, 2012, we received 30
retirement fraud referrals in a single day. However, in all 30
cases OPM had identified the death and permanently stopped
making annuity payments more than 5 years prior to the referral
to our office. The statute of limitations dictates that
criminal proceedings must be initiated within 5 years of the
government becoming aware of a potential theft or fraud.
Because of this delay by Retirement Services, the cases were no
longer prosecutable.
Finally, another 25 suspected retirement fraud cases were
referred to us by Retirement Inspections between July 2012 and
March 2013, but approximately 80 percent of these referrals
also had statutes of limitation problems. That's a prime
example from our enforcement side.
Mr. Clay. Well, that's a mouthful.
Mr. Farenthold. Thank you very much.
We will now go to the gentlelady from the District of
Columbia, Ms. Norton. You're recognized for 5 minutes.
Ms. Norton. Thank you, Mr. Chairman.
I'm impressed with how you've kept your payments, Mr.
McFarland, to deceased annuitants at low levels and going down.
Before I ask Mr. McFarland a question, let me ask you,
given that this particular issue is often a problem for public
and private entities alike, how are you able to keep the
numbers going down? Apparently, you had a 5-year number of $103
million over 5 years, and now it's down to $86 million, which
is 0.12 percent of your total payouts. I think that is
impressive.
First, I want to know how you are able to keep payments to
deceased annuitants from occurring in the first place. What's
your system for doing that?
Mr. Zawodny. Thank you, ma'am, for allowing me to address
your question. Automation matches that we perform in recent
years yielded extremely extraordinary results due to the match
not being performed in over 20 years. Now we have four main
contributing factors to driving down the reduction of the
number of these types of overpayments and referrals to the IG.
One, we conduct a weekly consolidated death match of the Social
Security Administration. We also do a yearly death match file
of the Social Security Administration to ensure that there was
nothing slipped in after the weekly one had done. The surveys
and matches----
Ms. Norton. So you do this match. How does anybody know
that someone has died? How do you keep the payments from just
coming, period, whether you are Social Security or whether you
are the Federal Government--or whether you are annuitants?
Mr. Zawodny. We rely on family members and others to notify
either Social Security or us directly that one of the
annuitants----
Ms. Norton. And people do that?
Mr. Zawodny. Yes, ma'am. Yes, ma'am. Quite often they do
that.
Ms. Norton. There must be a severe penalty for not telling
the government or telling the Social Security Administration
this person is no longer alive.
Mr. Zawodny. I am not aware of any penalty, ma'am, but any
annuity payments that have been made are then recouped from the
individual. We receive about 300 death notifications a day,
either from annuitants or current Federal employees, that we
process based upon notifications of family members or through
the Social Security Administration.
Ms. Norton. So how have you been able to keep the numbers
going down given what looked like a very tight system in the
first place? And then I want to ask, Mr. Zawodny, why you think
the effort has stalled in light of what seemed to be pretty
good figures.
Mr. Zawodny. We have been able to reduce the amount of
improper payments and our efforts to stop those payments
because of our concerted effort on that program. We have added
additional resources and retrained folks and made them more
aware of handling these cases in an expeditious manner. Using
the information from the Social Security on a daily basis,
relying on our surveys of older annuitants also helps us cut
down those death payments.
The current stall right now is we have continued to see an
increase in the number of deaths that we've had. But the
payment rate, the improper payment rate and the collection rate
has actually gone up, in my perspective, regarding the recovery
of those payments that were made to individuals.
Ms. Norton. Mr. Zawodny, what did you mean by stalling,
that you think this progress has stalled?
Mr. Zawodny. For me?
Ms. Norton. I'm sorry, Mr. McFarland.
Mr. Zawodny. Oh, sorry.
Mr. McFarland. What do I mean?
Ms. Norton. Yeah.
Mr. McFarland. What do I mean that it's stalled?
Ms. Norton. Yeah, that you are concerned about these
efforts now being stalled and therefore delaying the efforts
that have been underway.
Mr. McFarland. Well, I think the work that's being done by
so many people right now to reduce the backlog, I think the
effort and concentration by Retirement Services is in that
area. And I think other areas that we deal with specifically,
are concerned about, have been affected by that.
Ms. Norton. So how would you prioritize these matters then?
Of course they are payouts that you wouldn't want to have
happen. That is real money going out to people on the one hand.
Do you think that the priorities are skewed in any way?
Mr. McFarland. Yes, I do. I think that the priority that
Retirement Systems, I believe, has had for years is that they
do not, in my estimation, prioritize the problem of improper
payments.
Ms. Norton. Over--you think it should be the top priority?
Mr. McFarland. I'm not saying it should be the top
priority. But certainly the person on the street who is out of
a job and paying taxes, and other people paying taxes, they
certainly would believe that it should be a priority to take
care of the improper payments and not waste the taxpayer
dollars. Now, granted a lot of it's recovered. But what does
that mean? That means more people are working to recover it,
and those people are using taxpayer dollars.
Ms. Norton. Well, Mr. Zawodny, of course $86 million is not
chump change. So that's money going out. I don't know how much
of that money does get recovered. Have you any idea?
Mr. Zawodny. Right now, ma'am, we are at about 72 percent
recovery right now. The moneys that we haven't been able to
recoup are moneys that may have been paid to individuals who
have been incarcerated, through the help of the IG's office.
The individuals may have died themselves after stealing the
money from individuals. Or moneys that we just haven't been
able to recoup from whatever reason.
Ms. Norton. Thank you, Mr. Chairman.
Mr. Farenthold. Thank you very much.
I think we have got another few minutes before they call
votes on the House floor, so we'll start a second round of
questioning, and then we do have to leave. I will consult with
the ranking member to see if we are going to adjourn or come
back.
All right. So, Mr. Zawodny, you made some references to the
fact you're concerned about not being able to get caught up as
a result of not being able to continue overtime. Since the
beginning of the year, our numbers indicate 156 of your
employees have processed roughly 56,000 claims. That works out
to about three per day, or if you take out the weekends a
little over four. So you have got your employees processing
four, only on the average four claims a day. Again, I don't
understand the process of why it's taking 2 hours to do a
claim. Are they that voluminous? Are they that incomplete?
Mr. Zawodny. Sir, in some instances it's a matter of going
through and validating and verifying the information of that
current retiree, their 40 years of service, ensuring that we
have completed their service history calculations.
Mr. Farenthold. So you all are making a strategic decision
to be a little more aggressive in the beginning rather than
having to go back after them later for having--I assume they
sign something saying this is true and correct before they get
their check, do they not, the employee?
Mr. Zawodny. They sign their retirement application.
Mr. Farenthold. Right. And does it include their packet
saying the information in here to the best of my knowledge is
true and correct?
Mr. Zawodny. It does.
Mr. Farenthold. All right. Actually, as a watchdog, I
appreciate you all doing that. The amount of time it's taking
on an individual basis is a little bit troubling.
Let me go to Ms. Melvin and the IT. You looked at the OPM's
IT situation. They had a big failed project. Do you see some
things they can do immediately to kick the technology up, save
some time, and get this out the door faster?
Ms. Melvin. Well, I think that the approach that they are
taking, which is from what we see right now very modest,
incremental steps to implementing or upgrading some of the
technology that they do have, is probably a prudent and risk-
based approach for them to take, especially given the history
of their inability to be successful with such initiative in the
past.
What I think needs to happen going forward, though, because
this is still largely a manual process, and because it does
rely significantly on overtime to help maintain and bring down
the workload that they currently have, there has to be a
longer-term strategy and approach to making sure that the
department--the agency can in fact move to an overall
electronic capability.
So while we do agree that, you know, we see progress on the
part of what they've identified in the strategic plan that they
have, I don't view it as enough to make sure that they can move
ahead and have a long-term sustainable capability unless they
do a more in-depth assessment.
Mr. Farenthold. Dr. Kettner, I realize you've got a
commercial product that does a lot of what we are talking about
now. I assume you all work some with OPM to interface your
data, so you're a little--and you are familiar with the process
and the systems. Do you think there are some quick and easy
things that can be done relatively inexpensively--I'll save you
the trouble of doing a pitch for your company--but within the
OPM? Are there some quick and easy things? If you were the boss
of the OPM, where would you start?
Mr. Kettner. Okay. Well, I think there are certain steps
that could be taken immediately. And I think you are entirely
correct in thinking that more could be done at the agency
level. That's where the data comes from, and much more can be
done. And that's where our work is focused, on the agency side.
We do have tools that we provide to help the agencies.
The Achilles' heel in the whole retirement system is
getting the service history extracted out of the systems. It
currently is not maintained electronically in personnel and
payroll systems. But there is no reason in the world why the
data should not go over to OPM electronically. You know, it's
all put--all the data is keyed into our software, the data
fills out the forms automatically, and then the retirement
specialist at the agency prints it out, and then it gets mailed
over to OPM. And then they re-key all that data back in.
Mr. Farenthold. As the committee overseeing the Postal
Service, we appreciate your continuing to use the mail. It may
not be the most effective use of government resources there. So
you think it would be possible then, a good cost-effective
would be for OPM to focus on an API for your company or other,
your competitors would be able to send that data in a
standardized form.
Mr. Kettner. Absolutely. Absolutely. You know, and a good
example where this kind of cooperative partnership is working
is on the OPM USAJOBS hiring site. There is very cooperative
arrangements going on between my company and USAJOBS and other
vendors for there to be data interchanges between the vendors
tool and USAJOBS. There is no reason why this couldn't happened
in the case of the retirement--OPM's retirement system as well.
Mr. Farenthold. All right. And, Mr. Lynch, you have
somebody on your side you want to continue with additional
questions?
Mr. Lynch. Yeah, just a couple.
Mr. McFarland, help me with this. Have you looked at the
issue of the Affordable Care Act and OPM's responsibility
there? I know I had raised the issue earlier in the last round
of questions, but I really didn't focus on you.
Mr. McFarland. Yes, we have looked at it. We are involved
in assisting the agency, but on a rather limited basis.
Mr. Lynch. Okay. Well, I remember back when the Affordable
Care Act was being voted upon and decided upon and how this was
going to actually work. I raised some concerns that OPM wasn't
really resourced enough to handle the tremendous responsibility
they were being given. Are you comfortable that OPM can handle
their responsibilities with respect to these exchanges? They
are going to have to go in and set up exchanges in States where
States don't choose to do that.
Mr. McFarland. Yes, I believe they're working rather
diligently on being able to do that. I have no particular
reason to think that they cannot do it.
Mr. Lynch. Okay. Okay.
Mr. McFarland. And we have, as I said, we've been involved
to a limited basis.
Mr. Lynch. All right. I'm going to hold you to that. All
right.
Mr. Beaudoin, we're looking at some broad across-the-board
cuts here. I know that you've got a pretty good agency-to-
agency viewpoint. What do you think about the impending cuts,
furloughs, things like that across these different agencies for
Federal employees? What do you think the impact of this is
going to be if sequestration keeps going as it's currently
intended?
Mr. Beaudoin. I think, sir, that you are going to see a lot
more people taking early retirement versus those people that
would have stayed on for a number of more years. And then it's
going to be harder to replace them with the same caliber, the
same education, the same expertise that the outgoing people
have because really no one will want to work for the government
because of the furloughs, frozen salaries, the way that the
government employees are being treated now, and the way that
the public looks at them, that they're overpaid, and all the
bad press. So I think we're going to see, as I say, a lot more
retirements, and we're going to have trouble refilling those
positions.
Mr. Lynch. Very good. Thank you.
I'll yield back.
Mr. Farenthold. Thank you very much.
Ms. Norton, did you have--or I guess Mr. Clay would be
next.
Mr. Clay. I really don't.
Ms. Norton. No questions.
Mr. Farenthold. We timed that perfectly. The buzzer, as you
just heard, was the House calling for votes. I would like to
thank the witnesses, both for their testimony today and in many
cases their service to our government. This committee is the
watchdog for the Federal taxpayers, and we want to work with
you to be better stewards of the taxpayers' money, and combat
waste, fraud, and abuse at every opportunity. We'll continue to
follow this. And I encourage everybody to keep up the hard
work. Thank you very much. And we are adjourned.
[Whereupon, at 10:48 a.m., the subcommittee was adjourned.]