Friday, November 19, 2010

Warning on Pension Revisions

Recently NYCERS sent a retiree a pension revision letter dated October 21, 2010. The member had retired five years earlier in 2005.

NYCERS was notifying him that they were reducing his annual pension from $39,924 to $36,165 and that they were going to recover $18,915 in overpayments by further reducing his monthly pension check by $378 over the next 4 years.

The letter said that the reason for the reduction was that NYCERS had used the wrong required contribution percentages for the member when NYCERS was calculating his required contributions. NYCERS had originally used 4.45% effective as of the retiree's membership date in 1982 and 4.25% as of 6/30/97. NYCERS was now saying that it should have used 6.45% all the way back to 1982. This increased his required contributions from $42,979 to $77,325 and in turn reduced his pension benefit.

NYCERS gave no rationale for using any of these rates. NYCERS did not state a reason why NYCERS had reviewed the retiree’s case 5 years after retirement. NYCERS also did not provide the retiree with a copy of the new calculation of his required amount or the history of his pension contributions and the interest they earned.

The retiree called NYCERS on 10/29/10 asking for further explanation of this significant reduction. The call center agent told him that he would get a call back within 3 business days explaining the revision.

On November 9, 2010, after not receiving the promised call back, this retiree and I visited the NYCERS customer service center. The customer representative indicated that the inquiry had been misdirected and maybe that was why NYCERS had not returned the retiree's call.

During the meeting it became clear that NYCERS had not scanned the October 21, 2010 letter into the agency's imaging system until November 8, 2010, the day before our visit. This two and half week delay may have contributed to the failure to call back the retiree. For an agency that is as well funded as NYCERS, this delay is a sign of an operations failure.

From the specific rates quoted in the letter, I guessed that NYCERS was incorrectly applying the specific plan rate to the period from 1982 to 2002. The statute, however, specifically limited the plan rate to only service credited after 6/30/2004.

After we showed the applicable section of law to the NYCERS customer representative, he promised to get an answer from the officials upstairs and call the retiree the very next morning.

The member, however, did not receive a call the next morning. The member waited until 3:00 PM and called the NYCERS call center. He was eventually connected to the representative from the previous day who then told the retiree that the October 21, 2100 letter was in error. The representative also stated that NYCERS would send an explanatory letter and that NYCERS would cancel the scheduled changes to his November pension check.

Let’s hope that this story ends well. The retiree did receive a letter on November 19, 2010 confirming that the original letter was in error and that there would be no change to his pension check. There was, however, no explanation of the cause of the error. Everyone makes mistakes. It's how one handles the mistake that defines you.

I suspect that that without my help this retiree would have lost a lot of money. I have been trying for many years to get NYCERS to provide a rationale for their interpretation of the rates used in the pension plan that this member retired under. NYCERS has, however, refused to provide their rationale.