Mikulski calls OPM retirement system 'scandalously wasteful'

By Joe Davidson
Thursday, March 4, 2010; B03

Sometimes, it seems that the Office of Personnel Management won't get the federal retirement system fixed until the crawfish whistles on the mountain, as the Russians like to say.

Consider the problems that Frederick Hancock has had trying to get the retirement income he says he is due. Hancock is a disabled Vietnam vet from Greenbelt and worked for Veterans Affairs for 25 years. He retired in 2007. He tells a frustrating story of being given the wrong retirement forms to fill out for submission to OPM.

It took OPM six months to get back to him with the right papers. He sent those in, then waited three months before calling OPM. He was told that it did not have his personnel folder -- the VA Medical Center in the District did. The D.C. medical center bounced him to another office in St. Louis, which bounced him back to the VA in Washington, which again sent him to OPM, where he was told that his records were in its office in Boyers, Pa.

"And this goes on and on, passing the buck between the . . . agencies, placing the fault on the other one," Hancock said. "How much longer do I have to endure this lack of professional job performance?"

Hancock complained to Sen. Barbara A. Mikulski (D-Md.), who has been getting an earful from other retirees. She fired off a letter last month to OPM Director John Berry, telling him that the retirement information system he inherited "is scandalously wasteful and ineffective."

She said she was "disappointed to learn federal retirees often receive lower benefits for months or longer while waiting for OPM to calculate annuities. At times retirees have been overpaid, and thus are required to repay the overpayment with interest. This is an equally unacceptable practice."

Berry didn't try to sugarcoat the chaos that is the government's retirement system, which he indicated is in greater disarray than had been reported.

"Unfortunately, your concerns are valid and I share them," he said in a letter to Mikulski last week.

OPM has such trouble with the government's retirement system because so much of it is on paper. Uncle Sam may be ahead of Fred Flintstone, but not by much.

Berry told Mikulski that OPM's retirement systems modernization initiative is designed to update all retirement benefit computer systems and transition "from a process that is heavily dependent upon the use of paper documents to one that utilizes electronic data."

Before we get too optimistic about this cool-sounding RSM program, let us remember the even trendier RetireEZ. Now among the departed, RetireEZ was an RSM byproduct and included a retirement calculator. But RetireEZ couldn't count well enough, and OPM canceled a $290 million, 10-year contract for it in 2008.

Berry said his agency is upgrading its retirement calculator so that "it may handle many complicated computations more efficiently and effectively." Then he added: "However, much remains to be done to take full advantage of automation."

And that takes time. Berry said he wants to improve the administration of retirement benefits "through incremental and definable changes" that will lead to accurate payments and "high-caliber customer service."

"These fixes will not take place overnight," he said. "They will take more than a year or more to be fully functional."

Berry's letter revealed a problem in the "service credit deposit" system that resulted in incorrect interest rates being applied to payments owed by about 12,000 federal retirees. A service credit deposit is money, including interest, that an employee pays into the federal retirement fund. The deposit is something like a catch-up payment. It covers a period of employment during which the worker either made no retirement contributions or withdrew them. Otherwise, that period would not count in the calculation of the retiree's annuity, resulting in lower retirement income.

This problem was discovered in July 2008. Since then, "OPM staff has been attempting to design and test a data fix program for the existing accounts that had been affected by the interest rate error," Berry told the senator. He expects the testing to be completed this month. Only after that will OPM be able to determine when it will be fully functional.

"At the present time, we are providing manual calculations for individuals with open accounts upon request," he said. "Employees whose retirement is imminent are given priority, and manual calculations for these employees take approximately 5-10 business days."

For those not on the priority list, the wait can range up to 40 business days, he said. That could equal almost two months.

With a mess like this, the only thing federal retirees can hope for is good luck.

Staff writer Eric Yoder contributed to this column.