March 5, 2012
STATE EMPLOYEE RETIREMENT COMMISSION REGULATIONS
By: Mary Janicki, Research Analyst
You asked a series of questions regarding the State Employees Retirement Commission's regulations establishing the criteria for waiving repayment of overpaid pension benefits.
Under what authority did the State Employees Retirement Commission (SERC) adopt regulations establishing the criteria for an overpayment waiver?
In 1986, the General Assembly enacted the law that permits the State Employees' Retirement Commission (SERC) to adjust benefit payments to correct for errors (PA 86-348, codified at CGS § 5-156c). By law, the commission must adjust benefit payments whenever it discovers that an error has been made that affected benefits. If the commission finds that the system owes money to the retirement system member, it must give the member the choice of receiving higher payments or a lump sum payment. If a member or beneficiary has been overpaid through no fault of his or her own, the commission is authorized to waive any repayment if that would cause hardship. An overpayment can occur when a retiree receives disability benefits or workers compensation payments that should reduce the member's pension benefit or as the result of an administrative or clerical error.
Public Act 86-348 included the requirement that the Retirement Commission adopt regulations in accordance with the Uniform Administrative Procedure Act (UAPA) to establish “criteria for the waiver of repayment” (CGS § 5-156c(c)). The commission's regulations were adopted and became effective on December 21, 1987. These regulations have not been amended since they were adopted (Conn. Agencies Regs. § 5-156c-1).
Did SERC comply with required procedures in adopting these regulations?
Under the UAPA, a new or amended regulation is not valid until it has (1) been properly noticed, (2) had a public comment period, (3) been approved by the attorney general and the Legislative Regulation Review Committee (LRRC), and (4) been properly filed with the Office of the Secretary of the State. The secretary's office forwards a copy of a certified regulation to the Commission on Official Legal Publications for publication, which includes publication in the Connecticut Law Journal.
Table 1 shows the dates these procedures occurred when SERC promulgated and adopted the regulations establishing the criteria for waiving the repayment requirement for overpaid retirement benefits, in compliance with the UAPA.
Table 1: SERC Compliance with UAPA
Procedure in Adopting Connecticut Agencies Regs.
Notice of intent to adopt regulations published in Connecticut Law Journal
July 28, 1987
Preparation of the fiscal note
September 1, 1987
Public comment period
Attorney General approval
September 25, 1987
Legislative Regulation Review Committee approval
December 15, 1987
Office of the Secretary of the State filing
December 21, 1987
Publication in the Connecticut Law Journal
January 19, 1988
Attachment A is the certified copy of the regulations on file in the Office of the Secretary of the State with accompanying documentation of the adoption and approval process conforming to UAPA requirements.
What is SERC's criteria and procedures for determining hardship as articulated in the language of the regulation, communications to applicants for a waiver, and application requirements?
Subsection (a) of the regulation gives the commission discretion in granting a waiver by stating that it “will waive” repayment “when” the commission is reasonably satisfied that certain conditions have been met and only then (emphasis added). The waiver is not mandatory.
The three conditions for a “recipient's” hardship waiver set out in the regulations are:
1. the recipient could not reasonably have been expected to detect the error;
2. the recipient was not “at fault,” and
3. the repayment by the recipient would reduce his or her overall income from all sources to a level that would cause hardship and would not, therefore, in good conscience and in equity, permit the repayment of the overpayment.
To establish a recipient's claim of hardship, the regulations require that he or she produce the last two years' income tax returns and the current balance of all bank accounts. If the overpayment exceeds $10,000, SERC can require any other additional information. As specified in the regulations, SERC also encourages a recipient to provide “any other evidence that the Recipient feels may establish hardship.”
Retirement Services Division Policies, Practices, and Guidelines
The Retirement Services Division is the unit in the Office of the State Comptroller that administers the state employees pension plans and provides administrative support to SERC. When a retiree or beneficiary has received an overpayment for any reason, the state is required to seek repayment that, typically, is recovered by taking a determined amount as an offset from the retiree's monthly benefit payment for a specified period of time. In applying for a hardship waiver, the retiree has the burden to show to SERC's satisfaction that he or she meets all three of the above criteria.
The Retirement Services Division requires anyone requesting a waiver to complete its Financial Affidavit form. The retiree must sign the form under oath and have it notarized. He or she must provide weekly income amounts, including a spouse's, from all sources and expenses for rent or mortgage, utilities, food, clothing, and transportation, among other things. He or she must also report all liabilities or debts and assets, including home equity, motor vehicles, other personal property, bank account balances, and stock and insurance policy holdings. The retiree must also include “all relevant documentation.”
According to the Retirement Services Division, the condition of financial hardship may be met if recovery from the retiree's income and assets (calculated as a monthly repayment rate) would prevent the retiree from meeting ordinary and necessary living expenses for food, clothing, and shelter. The purchase or maintenance of non-essential items are not counted as living expenses and ownership of such items (like a boat or second home) generally indicates the retiree has assets sufficient to repay the overpayment amount.
Under what authority are these regulations and policies implemented?
By law, the general administration and responsibility for the proper operation of the state employees retirement system is vested in the State Employees Retirement Commission (CGS § 5-155a). SERC has general supervision of the system's operation and must conduct its business and activities in accordance with the law. As the system fiduciary, it must act with care, skill, prudence, and diligence as a prudent person would, in accordance with strict fiduciary standards.
The law also authorizes anyone whose claim has been denied to request that SERC review and reconsider any decision in accordance with the UAPA's contested case provisions.