PROVIDENCE, R.I. (WPRI) – The agency that oversees Rhode Island's state pension system is considering seeking criminal or civil action against six disabled retirees who were overpaid $559,000 by the state, General Treasurer Gina Raimondo said Tuesday.
"I think we have to have a policy of zero tolerance for fraud and abuse," Raimondo said. "More than a half-million dollars is a lot of money. This system is here to provide retiree security and pensions for hardworking people and it's all about integrity and accuracy and accountability. We just can't allow it."
The findings came after the Employees' Retirement System of Rhode Island (ERSRI) commissioned the Sullivan & Company audit firm to review 833 pension files and make recommendations on how the state could improve its disability pension program.
The report found that the overpayments to six individuals dated back as far 2001; the state has suspended those pensions, according to Raimondo. The state has also suspended three additional retirees' pensions for the reason, but has not identified how much they were overpaid.
Raimondo spokeswoman Joy Fox declined to identify the individuals currently being investigated. The treasurer said it is still unknown whether the six retirees were actively defrauding the system or whether the overpayments were errors on behalf of the state.
According to the report, Sullivan & Company analyzed pension data of 559 active retirees who were out on accidental or ordinary disability but had not qualified for a service pension based on their ages. The audit stated that ERSRI had not formally documented its policies for its annual reexaminations of the disability pension recipients.
Recipients of accidental disability pensions are paid 66 2/3% of their working salaries tax-free, according to Fox. State law requires disability pension beneficiaries to disclose their medical condition and earned income in continuing statement of disability affidavits to the retirement system each year.
The audit found that in both 2003 and 2005, that state had no affidavits on file at all. That number rose to 60% between 2006 and 2008 and spiked to 82% on file in 2009. Prior to 2001, very few pension recipients had the affidavits in their files, according to the report.
In all, the report noted that 17 of the active retirees have had their disability pensions suspended since they were first approved, but it did not reveal the reasons the payments were placed on hold and does not include information about how recipients may have been overpaid.
The findings led the state to hire Massachusetts-based Insight Service Group to serve as the ERSRI's first external and independent disability pension investigators. ISG was selected over five other investigative firms who responded to the state's request for proposal. The contract is expected to last one year and ESRI and will have an option for a two-year extension at the end of the agreement.
Raimondo also announced the ERSRI has reached an agreement with Lifespan that will provide the state with 65 new independent medical examiners to review disability pensions in the coming years.
"Even one instance of fraud weakens the entire system for our public employees and retirees," Raimondo said. "Finding ways to strengthen the accountability and integrity of the disability program and to rein in instances of fraud and abuse will continue to be a top priority."
Raimondo, a first-term Democrat who is expected to challenge Democratic Gov. Lincoln Chafee in a primary next year, was the chief architect of the state's landmark 2011 pension overhaul that is currently being challenged in court by organized labor.
The law suspended cost-of-living adjustments (COLAs) for retirees until the system is 80% funded; raised the retirement age for all workers; and created a new hybrid plan that combined a traditional pension with a 401k-style individual account.
Sullivan & Company was also contracted by the city of Providence to review its disability pension files, but it was not asked to issue recommendations on how to improve the system. The city's pension fund is not part of the state retirement system so the two reviews were not connected.
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