TEACHERS RETIREMENT BOARD BENEFITS AND SERVICES COMMITTEE. SUBJECT: Progress Report on Compensation Review Unit ITEM NUMBER: 6

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1 TEACHERS RETIREMENT BOARD BENEFITS AND SERVICES COMMITTEE SUBJECT: Progress Report on Compensation Review Unit ITEM NUMBER: 6 CONSENT: ACTION: ATTACHMENT(S): DATE OF MEETING: / 20 mins. INFORMATION: X PRESENTER: Peggy Plett PURPOSE The purpose of this item is to provide an update of the Compensation Review Unit activities. BACKGROUND The Benefits and Services Committee was last updated on the Compensation Review Unit at the November 7, 2012 meeting. Based upon recommendations from an internal Anti-Spiking Task Force and Board approval in 2011, the Compensation Review Unit was created to prevent the reporting of creditable compensation for the purpose of inappropriately enhancing a member s pension benefit. SUMMARY OF REFERRALS Since the last update on November 7, 2012, the Compensation Review Unit has reviewed 68 accounts and has requested or is reviewing information on an additional 179 accounts as of September 30, In addition, the Compensation Review Unit has referred 61 additional accounts to other business areas, the review of 23 has been completed. During this same time period, 214 new accounts have been received including 97 referrals from the Pension Hotline. B&S 27

2 Page 2 The Compensation Review Unit receives their workload from the following sources: Over the past year, CRU experienced a 50 percent staff vacancy rate. Similar to our Audit Office, the CRU positions are difficult to fill with qualified staff. The Pension Hotline and Internal Referrals continue to be our primary sources for referrals. And as of October 2013, the CRU is fully staffed and will resume utilizing data mining techniques to help prioritize reviews. B&S 28

3 Page 3 SUMMARY OF COMPENSATION REVIEW PROCESS The Compensation Review Unit (CRU) process involves extensive research on each review including: CalSTRS START data for reported compensation. CalSTRS electronic imaging files to view member documents. Collaboration with Audit Services to share information and ensure that there is no duplication of effort. District and County Offices of Education documentation, including but not limited to school board minutes, employment contracts, duty statements, and bargaining agreements. The CRU reviews the documentation provided to confirm that compensation is creditable to CalSTRS as defined in the Teachers Retirement Law and that it matches the compensation reported to CalSTRS. The CRU notifies the member if the review results in a possible adjustment to their benefit via a decision letter, consistent with board regulations. Members have the due process right to respond to the decision letter with additional information, and request an Executive Review and ultimately an Administrative Hearing if they are dissatisfied with the Executive Review decision. The CRU coordinates reviews with the Legal Office, ensuring compliance with the Teachers Retirement Law and regulations. SUMMARY OF ISSUES BEING REVIEWED While each case is reviewed for its unique aspects, there are general themes that emerge from staff s review. These include: Increases in the salary of members for extra assignments or reporting the additional assignment as special compensation instead of reporting the compensation as a separate position. Reporting compensation to the Defined Benefit Program that is inconsistent with the Teachers Retirement Law, such as fringe benefits and retirement incentives. Reporting compensation to the Defined Benefit Program that is inconsistent over the member s career and/or inconsistent within the same class of employees. B&S 29

4 Page 4 SUMMARY OF ACTIVITY DURING THE PAST YEAR The table below summarizes the activity from October 1, 2012 to September 30, Reviews by Issue Reviews Completed Reviews Pending Notifications Transmitted End of career spiking No action taken at the time Non-creditable compensation Subtotal - CRU Reviews General questions 6 4 Personal account questions 5 3 Not members of CalSTRS 1 1 Post-retirement referrals 4 10 Disability 1 2 Investment statement 0 0 Reporting Issue 4 28 Death case 2 2 Service credit issue 0 1 Subtotal Other Business Areas Referrals Totals Decision letters have been generated to 34 members informing them of possible adjustments to their accounts. Members are provided 45 days pursuant to regulations to appeal the decision and request an Executive Review before adjusting their account. Members are provided an additional 90 days to appeal the Executive Review determination for an Administrative Hearing. Of the 34 notifications: o 1 requested an Administrative Hearing o 12 accepted the adjustment, their accounts were adjusted and collection of overpayments has commenced o 2 are pending their 90 day Administrative Hearing expiration date o 17 are pending an Executive Review o 2 are pending their 45 day Executive Review expiration date. o Adjustments have been made to 15 member accounts. B&S 30

5 Page 5 $126, in annual benefits were adjusted $271, in estimated overpayments were identified for collection. $1,269, is estimated in future savings over ten years. The first review resulting in an Administrative Hearing for a CRU account review is scheduled for November An additional 12 accounts are awaiting hearing dates. B&S 31

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