DISABILITY RETIREMENT

INTRODUCTION

Beginning in July 1996 the Grand Jury received complaints from Santa Barbara County employees concerning policies and practices of the Santa Barbara County Employees Retirement System (SBCERS), specifically with regard to applications for disability retirement.

OBJECTIVE

To examine the process of application for disability retirement within the SBCERS to determine if the procedures, bylaws and practices of the System give applicants a proper hearing and timely adjudication. The 1996-97 Grand Jury did not evaluate the validity of individual claims.

APPROACH

The Grand Jury conducted interviews with the following:

· Sixteen of the 74 current or former County employees who have applied for disability retirement with the SBCERS between January 1, 1990 and October 31, 1996.
· Nine Directors of Santa Barbara County Departments and some of their staff.
· The Retirement Investigator in the Santa Barbara office of the SBCERS.
· Five attorneys with experience spanning the last 20 years in applications for disability retirement from Santa Barbara and other counties. In total they have represented at least 30 of the 74 current or former County employees who have applied for disability retirement with the SBCERS between January 1, 1990 and October 31, 1996.1
· A union officer from Local 620 of the Service Employees International Union.
· One member of the Board of Retirement prior to the filing of Case No. 217036: Board of Retirement, Santa Barbara County Employees' Retirement System vs. The Santa Barbara Grand Jury of the Santa Barbara Superior Court re: Jurisdiction of Civil Grand Jury. Further interviews of other Board members of SBCERS, including the Retirement Administrator, were prevented by legal actions initiated by the Board of Retirement2.

The Grand Jury also examined the by-laws of SBCERS; the agendas and minutes of Board of Retirement meetings held between January 1, 1990 and October 31, 1996; documents provided to Santa Barbara County Employees when applying for disability retirement; documents provided on a regular basis to employees of Santa Barbara County; return-to-work or light-duty policies within Santa Barbara, San Mateo, San Bernardino and Alameda counties and copies of disability retirement application documents supplied to the Grand Jury by applicants.

In addition, the Grand Jury examined the by-laws and tracked the procedures and records for disability retirements within the Employees Retirement Systems of Ventura, Sonoma, Sacramento, Contra Costa, San Joaquin and Stanislaus counties as a comparison study.

OBSERVATIONS

BACKGROUND

The Santa Barbara County Employee Retirement System is a defined benefit plan established under California Government Code relating to "County Employees' Retirement Law of 1937"3.

The County Treasurer is the Administrator and a fiduciary member of the Board of Retirement4. The Administrator maintains the assets of the retirement system as a trust fund held for the exclusive purpose of providing service, death and disability benefits to the county and special district participants and their beneficiaries5.

The Comprehensive Annual Financial Report (CAFR) for fiscal year ended June 30, 1996 shows that the County contributed $25.5 million to the Retirement Fund. Investment expenses of the Pension Trust Fund for year ended June 30, 1996 were $2.5 million. The Grand Jury was unable to ascertain where these funds were allocated. In addition, the 1996-97 final budget for the SBCERS is $714,000 which includes the salaries for a staff of 6.25 employees. However, the Proposed Budget for Fiscal Year 1996-97, notes a net increase in expense for retirement administration of $226,732 over the adopted budget for 1995-96 and states that the "principal source of the increase is costs associated with contested disability retirement claims"6.

The SBCERS has by-laws for the Board of Retirement pursuant to California Government Code section 31525. These by-laws and all amendments must be approved by the Santa Barbara County Board of Supervisors. SBCERS staff reported that they were last amended on January 11, 1994. The Grand Jury was informed that these by-laws are distributed to all employees of the County upon hire along with, more recently, Santa Barbara County Employees Retirement Association, a general information pamphlet, which was last modified on October 10, 1994. Information in this booklet includes the location, telephone number and mailing address of the Retirement Office. Previous Grand Juries reported on SBCERS in 1980-81, 1983-84, 1984-85, 1985-86 and 1986-87. Only two (1980-81 and 1985-86) mention disability retirements and in each case the investigation was performed by the Audit and Finance Committee and is therefore centered upon the financial implications of these retirements upon the retirement fund. None of the previous Grand Juries interviewed applicants to determine the procedures of the retirement system.


THE PROCESS OF APPLICATION7

1: A Santa Barbara County employee wishing to retire with either a service-connected disability or a non-service-connected disability is interviewed by the Retirement Investigator of the Employees' Retirement System, a division of the Treasurer-Tax Collector-Public Administrator's department. The Retirement Investigator reviews parts A and B of the application form with the potential retiree. Part A asks for beneficiary information and Part B is a release of information in order for the retirement staff to obtain Medical and Employment records. Some applicants fill out the form during the interview, others take it home and mail in the completed form.

The applicants who were interviewed by the Grand Jury reported the following:
· They would like application forms more readily available: i.e.. from their supervisors or from the Personnel Department.
· Six applicants appreciated the initial interview saying the retirement investigator explained everything very well.
· Four applicants felt the initial interview was designed to dissuade the applicant from pursuing a disability retirement.

2: Within one week of receipt of the completed form, the Retirement Investigator sends the applicant part C of the application which details job duties and asks for the applicant's interpretation of any medical restriction with regard to those duties. The questions vary depending on the position held in the County by the employee and are, to a certain extent, tailored to the individual with input from County Counsel and the applicant's representative on the Board of Retirement8.

3: The Bylaws of SBCERS Board of Retirement, Sec. 502 (a) allows the applicant 30 days to reply. If the applicant asks for an extension, the retirement staff grants it. A further extension, usually for reasons such as hospitalization or unavailability of attorney, is granted at the discretion of the Board of Retirement.

4: On receipt of part C, the Retirement Investigator subpoenas the applicant's medical records. The subpoena is issued by the Board of Retirement which demands the records within 30 days under penalty of fine.

The staff who were interviewed by the Grand Jury reported the following:
· Submitting the records usually takes 60 days and the fine is never enforced.

Applicants who were interviewed by the Grand Jury expressed the following concerns:
· Medical reports are not acted upon by the Retirement Office in the time-frame stipulated by the bylaws.
· The confidentiality of the information provided in part C of the application form is not protected by the Retirement Office staff and is made available to others outside the Retirement Office.
· Further information requested by Retirement Office staff after sections A, B and C have been submitted, causes considerable delay in the application process.

The attorneys who were interviewed by the Grand Jury reported the following:
· Medical reports are not acted upon by the Retirement Office in the time-frame stipulated by the bylaws.

5: On receipt of the medical records, the Retirement Investigator prepares a package of background information for the Medical Examiner chosen by the Board of Retirement and makes an appointment for the applicant. The package includes a narrative summary written by the Retirement Investigator, a summary of the applicant's job duties compiled by the Retirement Investigator and a summary of the medical reports written by the Retirement Investigator.

Applicants and their attorneys expressed the following concerns:
· The Retirement Office continues the search for "reasonable accommodations" after employees have worked their way through the County's Workmen's Compensation system with the Risk Management Department9.
· It appears the summary of medical records is prepared by a non-medical staff person.

6: The applicant has an examination by a medical examiner approved by the Board of Retirement who then prepares a forensic report.

Applicants and their attorneys expressed the following concerns:
· The Board of Retirement frequently does not choose local doctors to conduct the medical examinations, even though competent local specialists are available. For example, a psychiatrist from San Anselmo, who also has practices in San Francisco and Honolulu, is routinely used to evaluate applicants whose disabilities are psychiatric in nature. All applicants who reported seeing this doctor had applications for disability retirement denied when the information was presented to the Board of Retirement. Among the orthopedic cases, the Grand Jury noted that the same doctors names were reported repeatedly by applicants who had been denied disability retirement.
· The Grand Jury learned of at least one Medical Examiner who is an out-of-county physician who does not have Board certification in his specialty and has rendered decisions unfavorable to all applicants interviewed by the Grand Jury who named this doctor as their Medical Examiner. There are Board certified specialists available in all fields in Santa Barbara County.
· The choice of medical examiners by the Retirement Office gives the appearance that the staff is selecting doctors who will write a report denying disability.
· Under Article 5, Section 504 (a) of the by-laws of the SBCERS, the Retirement Office can demand an unlimited number of medical examinations of the applicant. This has the appearance of the Retirement Office asking for additional reports until one is written which favors its recommendation. In fact, the Grand Jury learned of at least two instances where Medical Examiners, chosen by the Retirement Office, wrote reports recommending disability retirement only later to reverse the decision, after being contacted by the Retirement Office. Revised reports were then written recommending denial of disability retirement,
· There are substantial delays on the part of the Retirement Office in presenting the report to the Board of Retirement. Although there are penalties imposed against the applicant if material is not turned in in a timely manner, there is no penalty to the SBCERS.

7: Under Article 5, Section 505(d) of the bylaws of SBCERS, 150 days are allowed from the date of filing of the application until the Retirement Office presents its report, including a recommendation to the Board of Retirement10. The Board then consults with either County Counsel or an outside attorney in order to make its decision. One of 4 possible recommendations is made:

Grant - subject to hearing. (An interested party, such as a department head could file an objection to the decision within 31 days).

Deny - subject to hearing. (An interested party, including the applicant, could file an objection to the decision within 31 days).

Refer case to a Hearing Officer.

Refer case back to Retirement Office for additional information.

It was difficult to determine how many service-connected disability retirements were granted between January 1, 1990 and October 31, 1996 by the Board of Retirement. According to information supplied to the Grand Jury by the Treasurer/Administrator there was 1; according to information supplied by the Board of Retirement dated October 31, 1996, there were 10; a review by the Grand Jury of the minutes of Board of Retirement meetings held between January 1, 1990 and October 31, 1996 indicates there were 5.

Applicants and their attorneys expressed the following concerns:
· Information given to the Board of Retirement in order for them to make their decision is compiled by Retirement Office staff. At the least this gives the appearance that the information is being screened.11 In addition, this information is not made available to the applicants or their attorneys so that they do not know what evidence is being considered in making a decision that affects their vested rights.
· The discussion regarding whether or not to grant disability retirement is made by the Board of Retirement in closed session with no opportunity for the applicants or their attorneys to participate. When the Board returns to regular session the applicants or their attorneys are given only a limited time to speak.
· Some applications have taken 12-months, or longer, before being presented to the Board of Retirement during which time some applicants report having received no communication from the Retirement Office. More than one applicant reported numerous unreturned phone calls to the Retirement Office.
· Applications for disability retirement had been denied on the grounds that alternative work had been offered to and refused by the applicant. Under California Government Code, this is acceptable only for retirement applications regarding service-connected disabilities (see footnote 9).

8: A request for a hearing before a Hearing Officer must be made within 31 days or the Board of Retirement's decision stands. Under the by-laws of SBCERS (section 508 (a)), the hearing must be commenced within 120 days of the date the Board grants the request for a hearing . Currently the Hearing Officers are all Administrative Law Judges: James Crary, James Armstrong, Elizabeth Lishner and John Rice.

Attorneys interviewed by the Grand Jury expressed the following concerns:
· When an applicant appeals a decision made by the Board of Retirement before a Hearing Officer, the Board's neutrality is threatened by the presence of the SBCERS legal representative.
· The same private attorney who represents the Board of Retirement before the Hearing Officers also advises the Board during their deliberations regarding disability retirements. This threatens the neutrality of the Board. For example, if the Board of Retirement denies an application for disability retirement and the applicant appeals to a Hearing Officer, the Board is represented at that hearing by a private attorney who presents the Board's case for denial. If the Hearing Officer nevertheless recommends that the applicant should be granted a disability retirement the Board of Retirement has the authority to accept or not to accept the Hearing Officer's recommendation upon the advice of the same attorney who represented their case for denial at the hearing.
· Materials in the Retirement Office case file are unavailable to applicants or their attorneys until less than 30 days before the date of the hearing.12 The attorneys reported that this is insufficient time for them to formulate a rebuttal case and stated that in their opinion their clients' rights to due process were therefore being violated.
· Applicants are not given adequate notice of the hearing date.


ADDITIONAL APPLICANT CONCERNS

More than one of the applicants interviewed withdrew the application for disability retirement because of the legal costs involved in continuing after the case had taken more than a year.

More than one applicant became discouraged by the length of time the application process was taking and changed the application from disability retirement to regular retirement which resulted in a substantial reduction in benefits.

More than one applicant reported being advised by Retirement Office staff to change the application from a service-connected disability to an application for a non-service-connected disability which resulted in a substantial reduction in benefits.

More than one applicant expressed the belief that there is a desire on the part of the Board of Retirement to deny disability retirements in order to aggressively protect the money in the Retirement Fund.

More than one of the applicants interviewed said the Board of Retirement puts itself in an adversarial position with regard to disability retirements rather than acting as an independent judicial body looking at the merits of the application.

More than one of the applicants interviewed reported being told by staff that applications for disability retirement take a very long time - sometimes years.

More than one of the applicants interviewed considered themselves traumatized by the experience of applying for disability retirement as a result of the repeated delays, postponements or cancellations of hearings; unanswered letters or telephone calls; and duplicated medical examinations.

More than one of the applicants interviewed expressed the view that it is inappropriate for the Retirement Office to research "reasonable accommodations". This was echoed by Directors of County departments who said that in the absence of a County-wide light duty/return-to-work policy, they make accommodations within their departments on a case-by-case basis (see footnote 9).


ADDITIONAL CONCERNS OF SENIOR STAFF OF COUNTY DEPARTMENTS

One senior staff member noted that it is to the advantage of the Board of Retirement to allow cases to continue for a long time because there is a chance that the employees will withdraw the applications.

More than one staff member noted that the by-laws of SBCERS are biased against granting disability retirement and recommended that there should be a limitation on how long the application process can take.

More than one Director of a County department noted that "reasonable accommodations" for employees who become disabled, whether on or off the job, are made within the department so that in the majority of cases, by the time an employee feels it is necessary to file for disability retirement, all possible accommodations have been attempted.

Unlike other counties in California, such as Alameda, Ventura and San Bernardino, Santa Barbara does not have a county-wide formal light-duty/return-to-work policy. All the Directors of Santa Barbara County Departments who were interviewed by the Grand Jury noted that although Health Care Services, the Sheriff and Public Works Departments have such departmental policies, Santa Barbara would benefit from a county-wide, formal light-duty/return-to-work policy.

The Occupational Health Council was established on June 1, 1993 under Ordinance #4103, approved by the Board of Supervisors. The stated purpose of the OHC is to identify, investigate and make proper resolution of issues related to occupational health, including reasonable accommodations of individuals with disabilities. The County Administrator, Personnel Director, Affirmative Action Officer, Health Care Service Director, General Services Director, Treasurer and County Counsel were seated on the OHC. The OHC first met on May 20, 1994, held six formal meetings and has not met since February 2, 1995.

All the Directors of County departments realized during the course of questioning by the Grand Jury that their knowledge of the process and procedures for application for disability retirement was limited.

Eight of the nine Directors of County departments who were interviewed by the Grand Jury thought the process of application for disability retirement was seriously flawed; one Director thought the application procedures work well.

The majority of the Directors of County departments who were interviewed by the Grand Jury reported that if it became necessary for them to apply for disability retirement for themselves, their first action would be to hire an attorney.


ADDITIONAL CONCERNS OF ATTORNEYS

More than one attorney told the Grand Jury that they believed the By-laws of the Board of Retirement were in need of amendment because they are weighted against the employee applying for disability retirement.

More than one attorney believes that the medical examiners chosen by the Board of Retirement are biased against the applicant and that the use of Agreed Medical Examiners would greatly improve the speed and efficiency of the application process.

More than one attorney suggested that the Board of Retirement should be neutral and act as an independent, impartial tribunal, particularly in light of the fact that the Board has subpoena power. The consensus was that in balancing their fiduciary responsibility between protecting the retirement fund from undeserved claims and providing financial security for employees permanently injured on the job, the members of the Board of Retirement have put the emphasis on the former at the expense of the latter.

More than one attorney stated that in their experience the application process for disability retirement in Santa Barbara County is more difficult than in any other county.

More than one attorney stated that the long process of application for disability retirement has severely hurt their clients financially, even to the extent of their losing their homes or being forced to move out of State.13

More than one attorney expressed the view that it is inappropriate for the Retirement Office to search for accommodated positions.


FINDINGS AND RECOMMENDATIONS

FINDING 1: Unlike other counties in California such as Alameda, Ventura and San Bernardino, the County of Santa Barbara does not have a formal light-duty/return-to-work policy.

RECOMMENDATION 1: The County Administrator should form a task force to develop a County-wide formal light-duty/return to work policy.

AFFECTED AGENCY:

1. Santa Barbara County Administrator Response

FINDING 2: The Occupational Health Council has not met since February 2, 1995.

RECOMMENDATION 2: The County Administrator should evaluate the Occupational Health Council to determine its effectiveness.

AFFECTED AGENCY:

1. Santa Barbara County Administrator Response

FINDING 3: Due to the pending litigation, the Grand Jury was unable to complete its investigation by interviewing the members of the Board of Retirement and the Retirement Administrator/Officer (see footnote 2). See Appendix A for a list of questions the Grand Jury would have liked to have had answered.

RECOMMENDATION 3: The 1996-97 Grand Jury suggests that the 1997-98 Grand Jury ask these questions of the Retirement Administrator and the members of the Board of Retirement.

AFFECTED AGENCY:

1. The 1997-98 Santa Barbara County Grand Jury.

FINDING 4: Employees of Santa Barbara County, specifically those applying for disability retirement, are not being well served by their retirement system.

RECOMMENDATION 4: The County Administrator should implement a Performance Audit on the Retirement System in order to determine if SBCERS is an effective and cost efficient retirement benefit for the employees of Santa Barbara County.

AFFECTED AGENCY:

1. Santa Barbara County Administrator Response

APPENDIX A

QUESTIONS FOR THE MEMBERS OF THE BOARD OF RETIREMENT

1. What is the Mission Statement of the Board of Retirement?
2. To whom is the fiduciary responsibility of the Board of Retirement?
3. What are the election procedures for nomination to the Board of Retirement? Are there term limits?
4. Has there been a year in the last 10 years when applications for disability retirement were routinely denied the first time they were presented to the Board of Retirement? If so, what changes have been made?
5. What is the record of the staff of the Retirement Office and of the Board of Retirement in adhering to the time limits for processing and adjudicating disability claims as provided for in the bylaws of SBCERS? How can delays be minimized?
6. Has a workshop on the subject of disability retirement ever been conducted for members of the Board of Retirement?
7. What documents do the members of the Board of Retirement use to make their decision whether or not to grant a disability retirement? When a disability retirement case is not clear-cut, to whom does the Board of Retirement give the benefit of the doubt?
8. Under what circumstances are applications for disability retirement sent to Hearing Officers?
9. What documentation is provided to the Hearing Officers in order for them to make their recommendation? Is this provided to the applicants and their attorneys with time and opportunity to rebut?
10. Is the same information which is given to the Hearing Officers also provided to the members of the Board of Retirement?
11. Under what circumstances, and by whom, are hearings before Hearing Officers canceled?
12. Are local doctors used as Medical Examiners? If not, why not? Are Agreed Medical Examiners used? If not, why not?
13. Who validates the certification and qualifications of the Medical Examiners selected by the Retirement Office?
14. The County of Santa Barbara Proposed Budget for Fiscal Year 1996-7 states: The current earnings and rate structure for the retirement system do not yield sufficient revenues from interest earnings and other sources to meet the statutory formula for funding which would permit a transfer of responsibility (for funding administrative costs) from the Board of Supervisors to the Board of Retirement. What is the statutory formula and what would it take in changes in earnings to meet it?

AFFECTED AGENCIES California Penal Code Section 933(c) requires that comments to Grand Jury Findings and Recommendations be made in writing to the presiding judge of the superior court within 60 days by all affected agencies except governing bodies, which are allowed 90 days. In accordance with Section 933.05, the responding person or entity shall indicate the following:

1. The respondent agrees with the finding.

2. The respondent disagrees wholly or partially with the finding, in which case the respondent shall specify the portion that is disputed and include an explanation.
3. The recommendation has been implemented, with a summary of the implemented action.
4. The recommendation has not been implemented, but will be in the future, with a time frame.
5. The recommendation requires further analysis, with an explanation and a time frame. This time frame shall not exceed six months from the date of publication of the grand jury report.
6. The recommendation will not be implemented because it is not warranted or is not reasonable, with an explanation.

The Grand Jury requests that all responses be submitted on a 3 inch computer disk along with the printed response.