D.C. agency failed to make millions in payments on life insurance premiums

By Nikita Stewart
Washington Post Staff Writer
Wednesday, June 16, 2010

A District government agency failed to transfer an estimated $3 million to $6 million deducted from disabled employees' paychecks for life insurance premiums to insurance providers -- a discrepancy Attorney General Peter Nickles has asked the inspector general to investigate.

A preliminary probe indicates that premiums from 1,400 city workers were not paid by the Office of Risk Management for about seven years, Nickles said at a news conference Tuesday. Asked about the funds' whereabouts, Nickles said he didn't know and that it was up to the inspector general to determine how the funds were dispensed.

"I have no information that the money was used for untoward purposes," said Nickles, who added that the funds were not used for the Disability Compensation Program.

Nickles said he was alerted to the discrepancy when an employee testified at a D.C. Council hearing that she had contacted an insurance company about a claim. "The response was: We don't have your name," Nickles said.

No city employees have been disciplined, and it appears that no claims were denied. The amounts that never made it to providers were nominal compared to health insurance premiums and providers were unaware that they were unpaid, Nickles said.

The cash-strapped city will have to find funds to pay the millions owed in premiums. Employees have been sent letters explaining what happened, but some of the premium increases over the years were not deducted, Nickles said.

The city is now changing the way the premiums are handled. Currently, they are entered manually but will be put on the same electronic system as health insurance premiums by August, he said.

Nickles's request for an investigation, backed by Mayor Adrian M. Fenty (D), follows an oversight council hearing on the risk management office Council member Mary M. Cheh (D-Ward 3) held in March and April.

Employees streamed in to testify about the failure in how the risk management office handled the premiums. "Initially, it looked like a couple of people were negligent," Cheh said, adding that the number of employees with similar stories was unusual. "Where were these monies going? . . . It certainly was something looking peculiar."

Cheh referred the matter to the D.C. Auditor, which conducts independent inquiries for the council. The mayor's office utilizes the inspector general to undertake such investigations.

© 2010 The Washington Post Company