CalPERS Moving to Crack Down on Disability Fraud; Working with Calif. Authorities to Identify Cases

December 15, 2004

The CalPERS Benefit and Program Administration Committee has voted to recommend that the full Board on Wednesday sponsor legislation that would provide CalPERS greater authority to stop abuse and fraud in the System’s disability retirement program.

The intent for this legislation is to:

— Improve the definition of fraud in the current law and establish civil and criminal penalties for committing such fraud, including restitution;

— Provide CalPERS the authority to require a disabled member who has achieved the minimum age of retirement to undergo a medical exam to determine his or her current level of disability; and

— Allow CalPERS investigators greater access to employment information from other state agencies.

“This proposal will give us greater power to stop fraud in its tracks,” said Kurato Shimada, chair of the Benefits and Program Administration Committee. “It will allow us to ensure that our disability program is not being taken advantage of and give us more latitude to weed out anyone who is receiving benefits fraudulently.”

The proposal also fulfills aspects of recommendation PS11 of the California Performance Review report regarding the disability retirement program. The review found that there is no statute which defines as fraud those activities associated with a member’s fraudulent application for retirement, and no clear penalties for such fraud.

Currently, CalPERS has a Disability Validation Team (DVT), that ensures the retirement system is making payments to qualified disabled members while simultaneously working to identify disability claims that are without merit.

“We have been investigating potential fraudulent disability for more than 20 years, but the law has always hampered our ability to penalize those who deceive the system. This proposal will strengthen our ability to expose abusers,” said Robert Walton, assistant executive officer of Governmental, Administrative & Planning Services.

CalPERS DVT is also working with the CHP and the Department of Corrections Workers’ Compensation Fraud Unit to jointly identify and work on possible fraudulent cases. CHP and Corrections reportedly have the highest cases of abuse since many of their employees are classified as safety members. In addition, the DVT is reviewing 21 cases identified by CHP’s Audit Task Force.

CalPERS is a public pension fund, with assets totaling more than $177 billion. The System provides retirement and health benefits to 1.4 million State school, and local public employees and their families.

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