BOSTON (SHNS) – Only about three percent of new retirees receive their first monthly benefit payments from the Massachusetts State Retirement Board on time and the average time between retirement and the first payment is nearly double what state law allows, Auditor Suzanne Bump’s office found.
When a state employee retires, the Retirement Board is supposed to make their initial retirement benefits payment by the end of the first full month following their retirement. The auditor’s office said that window can range from 28 days for someone who retires on the last day of a month to a maximum of 62 days for an employee who retires on the first of a month.
Bump’s office looked at 6,032 retirees whose effective date of retirement fell between July 1, 2017, and June 30, 2019, and found that just 175 of them got their first monthly benefit payments within 62 days, the maximum allowed timeframe. In one case, a retiree did not receive an initial payment for two and a half years after their employment ended.
“On average, the first payment took 115 days, which is 53 days longer than the state-mandated 62-day 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,” Bump’s office wrote in the audit published this week.
The auditor’s office and the MSRB pointed to “the submission of inaccurate or incomplete information by retirees and state government agencies” as the primary cause of the delays, similar to an issue that has plagued the state’s unemployment insurance claims process during the COVID-19 pandemic. The MSRB also said that “the retirement of many Human Resource and Payroll personnel across state government during the 2015 Early Retirement Incentive Program” has compounded the problem and further delayed some payments.
“Cumbersome processes and short timelines make the task of getting new retirement payments out the door on time incredibly difficult. The Retirement Board should take steps to gather information from pending retirees sooner and be clearer when they are waiting on information necessary to process payments,” Bump said. “This audit also shows that the long-term consequences of short-sighted solutions, like the Early Retirement Incentive Program, often outweigh possible financial benefits.”
Bump’s team of auditors suggested that the MSRB send the forms necessary to get the retirees’ most recent pay rate and retirement contribution information earlier than two weeks before retirement, as was the practice during the audit period. The MSRB said it waits until two weeks before retirement so it has the most up-to-date information and to avoid having to make changes after the fact. Bump’s office also pointed out that the MSRB said that “in many instances, multiple salary requests are sent before responses are received, so there can be delays in receiving the necessary information.”
Once the MSRB gets the necessary forms back from retirees or employers, they often contain inaccurate or incomplete information and “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 acknowledgment letters are issued,” the audit found.
The audit recommended that the MSRB send salary request and release forms to employing agencies upon receipt of a retirement application or within two weeks of receiving that application, and that it notify retirees if or when their applications are delayed.
In its response to Bump’s findings, the MSRB pointed out that it has taken steps over the years to mitigate the problem, like by making an advance benefit payment available for pending retirees whose first benefit payments have not been initiated after 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,” the Retirement Board said. “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.”
Bump’s office said establishing a monthly accelerated payment program “was a prudent measure to help retirees meet their financial needs while waiting to receive their retirement benefits” but noted that the advance payment process is not well-utilized. The auditor’s office said 123 of the 6,032 new retirees in its audit received advances, roughly 2 percent.
In addition to acknowledging that the MSRB was already taking some measures to address the concerns her office raised in its audit, Bump also pointed out that her team found that the MSRB had resolved an issue identified in a 2016 audit. That report found that the MSRB was sending payments to pensioners who had passed away and was underpaying pensioners whose payments should have increased after their beneficiaries’ deaths.
The retirement funds of state employees, teachers and many municipal employees in Massachusetts are invested through the Pension Reserves Investment Trust Fund. Officials on the Pension Reserves Investment Management board have said this year that they draw about $1.3 billion annually to pay retiree benefits and “are easily able to meet all of those commitments.”