Suzanne Bump

Massachusetts Auditor Suzanne M. Bump urged the Gandara Mental Health Center, a West Springfield nonprofit organization that contracts with state agencies for residential, mental health, and substance abuse-related services, to strengthen its financial management and improve internal controls in an audit released Thursday, March 3, 2016. (Facebook)

The Massachusetts State Retirement Board paid $687,000 to pensioners who were already dead, according to an audit released Wednesday by Massachusetts Auditor Suzanne Bump.

The retirement board has since corrected the problem and recovered $608,785 of the incorrect payments.

The retirement board also paid out $271,000 to pensioners whom it had inadvertently underpaid.

"I'm pleased that the MSRB has taken swift action to recoup funds, correct underpayments, and ensure that this problem does not occur in the future," Bump said in a statement.

The audit discovered that between July 2012 and June 2014, the retirement board, which oversees pensions for state employees, paid a total of $687,000 to 105 pensioners who had been dead for a median of 103 days. The average over-payment was around $6,500.

The over-payments were primarily due to a "communications breakdown" between LexisNexis and the retirement board related to new federal requirements about accessing data, which resulted in the board not receiving the most up-to-date death data from a federal database.

One case is being investigated by the Middlesex County District Attorney's office as potential fraud, since a benefit verification form was signed three months after the retiree died.

The underpayments were the result of a policy that allows a retiree to withhold part of his pension payment to make it available to his beneficiary if the retiree dies first. If the beneficiary dies first, the retiree will begin getting his entire benefit amount. The retirement system, however, did not make the change to give retirees full benefits when their beneficiary died. As a result, 44 pensioners were underpaid an average of $5,350. One person was underpaid $41,200, after that person's beneficiary had been dead for 3,269 days without the knowledge of the retirement system.

The retirement board said in a response to the audit that the audit mischaracterizes the size of the overpayments. It notes that there will always be some overpayments and underpayments when the board is adjusting benefits due to a death, since it takes time for deaths to be reported and for the payment amount to be adjusted.

In fiscal year 2014, the state retirement board paid $1.8 billion in benefits to 57,000 retirees and their beneficiaries.

Audit Report - Massachusetts State Retirement Board by MassLive2