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Botched predictions on federal retirement have breathed life into the idea of a so-called retirement tsunami. But it hasn't materialized, leaving the government to deal with a slow leak. Federal News Radio's special report, Retirement Conundrum, investigates what led to the faulty forecast, why OPM has trouble reducing the retirement claims backlog, and how agencies retain institutional knowledge as longtime employees walk out the door.
Sequestration threatens OPM's low-tech plan to beat retirement backlog
Thursday - 5/30/2013, 7:40pm EDT
A series of failed technology modernizations and dwindling staff had, by the end of 2011, allowed a growing backlog of pension claims to swell to more than 60,000. Federal retirees stuck in the logjam were receiving only partial annuities — which for some threatened financial ruin, according to advocacy groups.
OPM began to turn it all around with an "all-hands-on-deck" strategy that aimed to clear the backlog almost entirely by this July and to begin processing 90 percent of new claims within 60 days. But a recent surge in retirement cases has put OPM behind schedule, while across-the-board budget cuts have forced the agency to scale back its use of employee overtime — one of the key weapons in shrinking the backlog.
In part two of our special report, "Retirement Conundrum," Federal News Radio examines how OPM set out to beat the backlog and how the agency can stay on track as a confluence of factors threatens to derail progress.
OPM at 'critical juncture'
OPM backlog by the numbers
184,651 — number of claims processed in last 16 months
11,540 — average number of claims processed each month over the past 16 months
136 days — average number of days it takes to process a retirement claim
4 — number of failed IT modernization initiatives since 1987
1.8 million — number of phone calls OPM's Retirement Services office receives each year
34,000 — number of claims processed in 2012 specifically due to expanded overtime
80 percent — estimated percent of full annuity that retirees typically receive from their interim annuity
23,078 — number of claims OPM projected to have in backlog as of April 2013
30,080 — number of claims still in the backlog
For much of the past 16 months, OPM's longstanding backlog of retirement claims has gone in one direction — down. Tottering at more than 60,000 claims last January, the backlog now stands at half that — 30,080 claims. Even so, OPM had hoped to have the backlog down to just slightly more than 23,000 by this time.
But it's not as if the agency's processing efforts have been lax. OPM has processed 43 percent more claims in the first four months of this year compared to last. Rather, OPM has been hit by a surge of unexpected claims this year, much of it attributable to early-retirement offers at the U.S. Postal Service.
Then, a further blow occurred. Last month, OPM announced, starting May 1, it would have to suspend overtime hours for employees who work on processing retirement applications and cut hours for its call-center operations because of the automatic budget cuts, known as sequestration.
"We are at a critical juncture," Ken Zawodny, OPM's associate director of Retirement Services, testified at a House Oversight and Government Reform subcommittee hearing earlier this month. "Without proper resources, the momentum we currently have processing claims … will be in jeopardy."
Last year, the use of overtime allowed OPM employees to process some 34,000 claims, about 26 percent of OPM's total processing output, Zawodny said.
The monthly update of OPM's processing efforts, which is scheduled to be released next week, will be the first glimpse into how OPM is faring without the use of overtime.
It's still too early to tell exactly how the reductions will impact OPM's July goal, Zawodny told Federal News Radio in an interview last week.
"Without keeping the people that they have on board and the overtime they were using ... I don't see how this is going to get any better," said Dave Snell, director of federal benefits at the National Active and Retired Federal Employees Association (NARFE). "And it may get worse."
OPM sees success with low-tech approach
OPM's current strategy for clearing the backlog emphasizes low-tech solutions: the hiring of additional staff, expanding work hours through overtime and better coordination with agencies to make sure retirement applications are complete when they're sent off to OPM.
One of the reasons the backlog had grown to unmanageable proportions was because OPM lacked the staff to handle the influx of claims, Zawodny said. "We did not have enough through-put to actually process the incoming requests for retirement," he said.
Once an employee files for retirement, the path to receiving a full pension is complicated, involving no fewer than a dozen different steps, the transfer of both paper files and digital data, and close coordination between agencies, federal payroll processors and OPM's Retirement Operations Center located in a refurbished mine in Boyers, Pa., a tiny village about 60 miles outside Pittsburgh.
The complicated — critics say convoluted — process becomes even more tangled when employees have gaps in service or complicated histories that require more time to verify, such as stints at multiple agencies or military service.
All told, it now takes OPM an average of 136 days to complete the process. That's down from 156 days last year. However, many employees say they wait much longer — up to a year or more.
Rep. Blake Farenthold (R-Texas), chairman of the House Oversight and Government Reform Subcommittee on the on Federal Workforce, U.S. Postal Service and the Census, has dismissed the current system as, "thousands of manila folders, imaged files and a COBOL system patched together with spreadsheets."
And with sequestration threatening to snag OPM's efforts, some think it's time for the agency to put its focus back on a technological overhaul to the largely paper-based system.
But OPM has a checkered past where technology is concerned.
OPM's first attempts at IT modernization came in 1987 but fell apart after eight years of planning, according to a Government Accountability Office review. That pattern would be repeated over the next decade and a half. The most recent effort to automate the process and convert paper records to a digital format — called "RetireEZ" — was deployed in February 2008 but lasted just three months before OPM suspended operations and canceled the $290 million contract supporting it because the revamped system failed to work as intended.
OPM finally canceled the entire project in February 2011 and has since abandoned grand visions of IT modernization.
"It was one big-bang type of approach to a process that I don't think was fully imaginable at the time," Zawodny said. "What we've done in our incremental approach is been able to take segments of the entire process and look to see what we can automate right now, what provides the best benefit to agencies and to the annuitants to make our process more complete."
George Kettner, president and founder of Economic Systems, whose software is used by many federal agencies to calculate estimated retirement benefits, said he hopes OPM doesn't "give up on the technology side of the equation" entirely.
Kettner said OPM's current approach of putting more people on the problem is simply a "brute force" strategy and one that may not be all that sustainable given sequestration.
Zawodny said he agrees improvements can be made to the process. But large-scale IT modernizations have been tried numerous times — and failed. OPM's current path has shown actual results where others haven't, he said.
Can't get through on the phone?
Federal News Radio has received numerous complaints from retired federal employees complaining of the difficulty in reaching OPM on the phone.
When retirees can't reach OPM by phone, they should try email (Retire@opm.gov) or OPM's recently expanded Retirement Services Online portal, said OPM Associate Director for Retirement Services Ken Zawodny.
Retirees can view the status of their cases while in interim pay, make address changes and start allotments using the site. The online portal is open to all 2.5 million federal retirees, though less than one quarter of employees access it on a regular basis, he said.
"If I hit a wall, I'm going to find a way around that wall or tear down that wall to be sure the improvements that we need to make to better service our customers (are) going to be completed," Zawodny said.
OPM is pursuing modest technology upgrades, including a Web-based application called Data Viewer that aims to help agency HR offices compile complete service histories by allowing them virtual access to OPM retirement records. In its 2014 budget request, OPM also requested $2.6 million to fund a new case-management system to streamline the process and digitally track retirement data.
Other areas suffering?
Even before sequestration threatened to throw OPM off balance, there were other concerns with OPM's strategy.
At a House subcommittee hearing earlier this year, OPM's inspector general suggested the agency's zeal to reduce the pension backlog had diverted resources and attention away from other areas, such as cutting down on $100 million OPM makes in improper payments each year.
"What I think has happened is this backlog has caused a real problem for the other aspects of Retirement Services," OPM IG Patrick McFarland testified at the hearing, citing a drop-off in the number of cases of suspected fraud the office brings to the attention of the IG.
Zawodny said the decline is because his office has made dramatic improvements in stopping erroneous payments before they ever head out the door.
But the IG isn't the only one who fears that OPM's focus on reducing the pending- claims backlog has short-changed other areas.
Snell lauded the progress OPM has made on that front but said many retirees who need to have their claims adjusted — following a death or a divorce, for example — are now facing longer waits.
Still, he said, he's aware of the agency's limitations.
"It's not like OPM can call in a troop surge and take care of things," Snell said. "They're limited. They have to pick and choose what the priorities are. And they've made that choice."
MORE FROM THE SPECIAL REPORT, RETIREMENT CONUNDRUM: