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OPM Halts Work on Retirement Calculator

By Stephen Barr
Friday, May 30, 2008

The Office of Personnel Management sent a "stop work" letter to the contractor developing a software system to calculate retirement benefits for federal employees, officials said yesterday.

The contractor, Hewitt Associates, was given 10 days to propose a remedy for flaws and defects uncovered by the OPM during tests of the benefits calculator. Only five of 61 functions worked as intended during recent testing.

"We are obviously disappointed," said OPM Director L inda M. Springer.

Still, she stressed that the benefits calculator represented only a third of the project to upgrade retirement claims processing, known as RetireEZ. "It is just a pause to determine how we go forward, either with Hewitt or with someone else," she said. "It is not a pause for the whole project; it is only a pause for the calculation engine piece."

Hewitt, a consulting and outsourcing firm with headquarters in Illinois, responded in an e-mail from company spokeswoman Amy Wulfestieg that "we are working closely with OPM to understand their rationale and respond to the notice."

OPM officials indicated that they were surprised that the automated calculator had failed to perform. They said they had received repeated assurances from Hewitt since February that the project was on track and had negotiated ground rules with Hewitt for testing the calculator and how test results would be analyzed.

The RetireEZ system is supposed to permit the OPM to move out of a labor-intensive, paper-based system for calculating pensions earned by federal employees. In the past, most government employees have received a partial annuity at the start of their retirement because agencies and the OPM had to pull together paper personnel files, a process that can take months.

An automated system will allow the OPM to make full and correct pension payments within days of an employee's retirement. Springer has made that one of her priorities, in part because the OPM workload is growing as increasing numbers of baby boomers retire.

The OPM has said the new system would have to be capable of making up to 150 distinct calculations because federal employees are covered by different retirement rules. The formula for figuring the annuity of a law enforcement officer is different from the rules applied to a postal worker, for example.

Hewitt and the OPM launched the system in February, and the OPM said the system successfully delivered on 15 of the most common retirement calculations.

But the OPM contracting team decided to call a temporary halt to the project when tests showed that the system could handle only five of the next 61 functions. The calculator produced wrong answers some or all of the time or failed to even calculate an annuity.

Faced with a deadline of today on whether to accept Hewitt's work and continue with the project, the OPM decided to call a temporary halt.

The problems with the calculator will not affect pensions that have been paid or those that will be processed in coming weeks because Springer has kept the old method of figuring annuity payments in operation as a safeguard, on the assumption that bugs might be found during system tests.

OPM employees continue to clean up paper records for conversion to digital files and streamline the process for approving retirement claims. That work will help speed up retirement payments, even without an automated calculator, the officials said.

About $21 million has been paid to Hewitt to put the calculation engine in place, out of $27 million set aside for the project. The overall value of the Hewitt contract is projected at $290 million over 10 years for planning, acquisition, operations and maintenance of the RetireEZ system.

Talk Shows

John Salamone, executive director of the Chief Human Capital Officers Council, will be the guest on "FedTalk" at 11 a.m. today on WFED radio (1050 AM).

Linda M. Springer, director of the Office of Personnel Management, will be the guest on the IBM "Business of Government Hour" at 9 a.m. Saturday on WJFK radio (106.7 FM).

Stephen Barr's e-mail address isbarrs@washpost.com.

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