It Pays to be a Dead Federal Retiree

The OPM Office of the Inspector General has issued a report showing that payments from the federal government’s Civil Service Retirement and Disability Fund to deceased annuitants has averaged $120 million over the last five years.

The OPM Office of the Inspector General has issued a report showing that payments from the federal government’s Civil Service Retirement and Disability Fund to deceased annuitants has averaged $120 million over the last five years.

Inspector General Patrick McFarland said that he and OPM Director John Berry are in agreement that it is time for these incorrect payments to stop.

“This report …reemphasizes our concern that sufficient funds and resources of the U.S. Office of Personnel Management (OPM) be focused on this serious matter in order to bring about a full measure of success. Director John Berry and I agree that it is time to stop, once and for all, this waste of taxpayer money.”

The report notes that OPM has taken positive steps to address the problem, but says that they have clearly not solved it. Some of the attempted improvements to date include:

  • Death Master File Match
    Retirement Services committed to performing, in addition to the weekly match, an annual computer match between its annuity roll and the Social Security Administration’s (SSA) death records. The annual match was performed in 2005, 2009, and 2010, and is scheduled to be performed again in the Fall of 2011
  • Over 90 Project
    OPM sampled the annuity roll population over 90 years old (Over 90 Project) in September 2009, which at that time totaled 125,000, to confirm that the annuitants are still alive and appropriately receiving an annuity from the CSRDF.
  • Internal Revenue Service (IRS) Form 1099R
    These forms are mailed out annually to annuitants and report taxable annuity income received. As of May 2011, OPM received approximately 33,000 returned 1099Rs from the January 2010 mailing and Retirement Services is analyzing the forms to determine whether the annuitant has a new address that has not been reported to OPM, or is no longer living;
  • Automated Check Reclamation System
    In January 2010, OPM implemented an Automated Check Reclamation System to streamline the reclamation process, thereby saving significant time and resources. A reclamation is an action taken by the Government to recover improper post-death payments from financial institutions. The automated system ensures that all annuitants removed from the active annuity roll because of death are processed through OPM’s Death Data Reporting System, which automatically initiates a reclamation action through the U.S. Department of Treasury (Treasury);
  • Treasury Denied Reclamations
    Due to Treasury regulations and procedures, not all requests submitted to Treasury for reclamation of post-death payments are sent to the financial institutions for recovery. Financial institutions are not liable for the return of post-death payments made more than six years prior to the date of the request for reclamation. Therefore, at our suggestion, a process was implemented by OPM to reach out to financial institutions for reclamations denied by Treasury;
  • Improving Death Reporting
    To improve the timeliness of death reporting, OPM enhanced communications with annuitants and their family members through changes to mass mailings, the creation of video messages for the OPM Website, and recorded telephone messages activated while placed on hold by OPM Call Center representatives.

The report notes that OPM does not have annual recovery targets in place to drive annual performance. Since recovery of improper payments is often difficult, it makes it a challenge for an agency to set a target, but agencies are told by OMB that they must strive to recover at least 85% of improper payments within 3 years. If an agency can’t meet that target, it must get approval from OMB before setting a lower target amount. In FY 2010, OPM only recovered 46% of the improper payments to deceased annuitants.

In the grand scheme of things, the $120 million in improper payments is hardly noticeable considering the combined amount of all of the federal government’s improper payments. According to the Washington Post, the federal government’s total improper payments (not just to deceased annuitants but across all entitlement programs) have totaled about $125 billion in FY 2010.

Stopping Improper Payments to Deceased Annuitants

About the Author

Ian Smith is one of the co-founders of FedSmith.com. He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.