Audit Report on The Board of Education Retirement System’s Controls Over The Identification of Improper Payments To Deceased Recipients

Executive Summary

The New York City Board of Education Retirement System (BERS) is one of the five New York City (City) retirement systems that provide benefits to their members who have retired as well as to designated beneficiaries of those members.^[1] BERS was founded on August 1, 1921 and provides retirement benefits for several categories of employees of the City School District of the City of New York, the City, and other entities. BERS uses the Comprehensive Pension Management System (CPMS) to maintain information concerning active and former members, retirees, and beneficiaries as well as copies of related correspondence and supporting documentation.

BERS processes monthly pension payments through the City’s Pension Payroll Management System (PPMS) and terminates them through PPMS after a benefit recipient dies.^[2] BERS identifies a benefit recipient as deceased through the following means:

• Notification from the decedent’s family;
• Various death match reports generated through the City Human Resource Management System (CHRMS) and the City’s Report Management and Distribution System (RMDS), which in turn rely in part on the U.S. Social Security Administration’s (SSA’s) Limited Access Death Master File (LADMF);^[3]
• Deceased notices recorded in the City’s Payroll Management System (PMS);^[4]
• Notification from the decedent’s bank; and
• Non-responsiveness to a BERS’ mailed request to a benefit recipient to provide a signed and notarized affidavit, also called an attestation, as proof the benefit recipient is alive.^[5]

During Fiscal Years 2019 and 2020, BERS paid $280 million and $296 million, respectively, to approximately 20,000 benefit recipients.

The objective of this audit was to determine whether BERS had adequate controls in place to identify improper benefit payments to deceased recipients.

Audit Findings and Conclusion

Although BERS has established control procedures to identify and prevent improper pension benefit payments to deceased recipients, those procedures may not be sufficient to identify deceased recipients. The audit identified two factors that bring the adequacy of the controls into question: (1) the inherent limitation of the SSA’s LADMF that BERS relies on as a primary means of identifying recipients who have died; and (2) BERS’ practice of applying its principal supplemental control procedure—obtaining affidavits as proof of life—to only a fraction of its total number of benefit recipients.

In addition, we found that PPMS and/or CPMS did not contain accurate dates of birth (DOBs) for 188 benefit recipients, which can result in improper benefit payments. BERS subsequently corrected the DOBs in its CPMS file provided to us.

Deficiencies in, and non-compliance with, the control procedures in place increase the risk that BERS may issue unwarranted payments in the names of deceased benefit recipients.

Audit Recommendations

To address these issues, we make the following three recommendations that BERS should:

• Establish additional procedures to address the deficiencies and limitations this audit identified in BERS’ current computer-assisted death match reports, including by researching and assessing the availability, coverage, and effectiveness of other death match services offered through government programs and private vendors.
• Send affidavit requests periodically to all benefit recipients who are age 85 and older.
• Notify the City agencies that manage, maintain, and enter data in PMS and any other relevant payroll system of the inaccurate information relating to the DOBs of BERS’ members that BERS confirmed as a result of this audit and request that the responsible agencies review the source data and correct the errors as warranted.

Agency Response

BERS agreed to implement all three of the audit’s recommendations.

[1] The other four retirement systems are: New York City Employees’ Retirement System; New York City Fire Pension Fund; New York City Police Pension Fund; and New York City Teachers’ Retirement System.

[2] A benefit recipient can be a retiree or a beneficiary who receives pension benefits after a retiree dies pursuant to the retiree’s previously-filed designation or by court order, such as a Qualified Domestic Relations Order.

[3] Reports generated through CHRMS and RMDS include: the Death Match Discrepancy Report, the HR11 – SSA Death Match and the Death Date Integrity Report.

[4] For retirees who were re-employed by the City after their retirements.

[5] BERS sends affidavit requests to: (1) a sample of benefit recipients who are 85 years of age and older; (2) benefit recipients who did not cash pension checks for more than three months; and (3) benefit recipients whose mail was returned by the United States Postal Service.