Audit Report on the New York City Employees’ Retirement System’s Controls Over Identification of Improper Benefit Payments To Deceased Recipients

Executive Summary

The New York City Employees’ Retirement System (NYCERS) was established in 1920 to provide retirement benefits for City employees who are not eligible to participate in any of the City’s four other retirement systems. NYCERS uses two pension administration systems: (1) PROD to maintain active members’ and retirees’ information; and (2) NYCEwork to maintain copies of related correspondence and supporting documentation.

NYCERS processes monthly pension payments through the City’s Pension Payroll Management System (PPMS) and terminates benefit payments in PPMS after a benefit recipient dies.^[1] NYCERS identifies a benefit recipient as deceased or potentially-deceased through the following means:

• Notification from the decedent’s family, friends, unions, or banks;
• Death match reports provided by two contracted vendors—the National Association for Public Health Statistics and Information System (NAPHSIS) and Pension Benefit Information, LLC (PBI);
• Non-responsiveness to a request NYCERS mails to a benefit recipient for a signed and notarized affidavit, also known as attestation, as proof the benefit recipient is alive.^[2]

During Fiscal Years 2019 and 2020, NYCERS paid $5.26 billion and $5.31 billion, respectively, to approximately 165,000 benefit recipients.

The objective of this audit was to determine whether NYCERS had adequate controls in place to detect and prevent improper benefit payments to deceased recipients.

Audit Findings and Conclusion

NYCERS has adequate control procedures in place to detect and prevent improper pension benefit payments to or in the names of deceased benefit recipients, provided those procedures are consistently followed. However, we found NYCERS did not demonstrate that it consistently followed its control procedures since it did not mail affidavit requests to all beneficiaries who were aged 85 and above during Calendar Year 2019.

In another matter, we found that NYCERS might improve its death-matching process by joining with the City’s four other retirement systems to centralize their death match service contracts.

Audit Recommendations

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

• Send affidavit requests periodically to all benefit recipients who are aged 85 and above.
• Properly document all changes in procedures in writing.
• Consider coordinating with the City’s four other retirement systems, as well as FISA/OPA, to centralize the death match service contracts to attain more comprehensive death match data and for potential cost savings.

Agency Response

NYCERS generally agreed with Recommendations #2 and #3. However, NYCERS effectively disagreed with Recommendation #1, although it did not directly state so. Rather, in its response, NYCERS reiterated that, effective August 23, 2019, it had changed its procedures to eliminate the requirement that affidavits be requested from recipients aged 85 and above, unless they reside in geographical areas not covered by its automated death match tools. Thus, NYCERS effectively rejected the audit recommendation that it request affidavits from all benefit recipients aged 85 and above. In addition, NYCERS stated that it “introduced automation to improve the process in October of 2021” and that “[t]he system will now automatically send out an affidavit to all Clients who meet the exception criteria.” Finally, NYCERS stated that it “has strengthened its internal controls and enhanced its ability to promptly detect and prevent unauthorized payments.”

[1] A benefit recipient can be a retiree, or a beneficiary who receives pension benefits after a retiree dies, or a beneficiary designated pursuant to a court order.

[2] NYCERS sends affidavit requests to benefit recipients: (1) who are aged 85 and above; (2) whose benefit payments are returned by the banks three times or benefit checks are not cashed for six months; (3) who receive disability benefits; and (4) who are the surviving spouses and receiving accidental death benefits.