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Federal official says LIRR pension program vulnerable to fraud

A train leaves the Syosset LIRR train station

A train leaves the Syosset LIRR train station on July 26, 2011. Credit: Chris Ware

The head of the federal agency that has paid disability benefits at an alarmingly high rate to Long Island Rail Road retirees defended the system from a scathing report by the board's watchdog, saying the LIRR's own pension setup proved easy to "exploit."

In a Feb. 18 letter, U.S. Railroad Retirement Board chairman Michael Schwartz also rejected calls for federal reforms as costly and unwarranted.

Schwartz was responding to Board Inspector General Martin Dickman, who blasted the three-member board for its "continued inability to effectuate substantial and meaningful change" to the beleaguered occupational disability system.

Dickman wrote Feb. 10 that even after the board attempted to increase oversight for LIRR disability applicants the rate of LIRR applicants being approved for occupational disability benefits "remains essentially unchanged" at nearly 96 percent.

Dickman noted that even some retirees who had their disability annuities revoked after being indicted on fraud charges, and who later pleaded guilty, reapplied for the benefits and were approved.

So far, 33 people have been charged and convicted in connection with a massive LIRR disability fraud scheme, including two doctors.

In his response, Schwartz wrote that Dickman's report "fails to acknowledge the circumstances surrounding the fraudulent scheme and the elements which made this fraud possible."

That includes a now-closed LIRR pension program "unlike any other in the nationwide rail community" that allowed workers to retire at 50 with 20 years on the job. Investigators have said the generous program gave retirees an incentive to apply for federal disability benefits, which they could also collect at 50.

Those factors, Schwartz said, coupled with a "concerted effort" by some doctors and facilitators, including inside the LIRR, allowed retirees to abuse the federal system.

The LIRR said in a statement that it agrees with Dickman's calls for major reform of the federal system. The railroad noted that the number of retirees applying for disability benefits has "dropped dramatically" over the past three years, in part because of the LIRR's efforts to combat fraud. "We share the RRB Inspector General's outrage over the continued mismanagement of the program," the railroad said in a statement.

But Schwartz shot down Dickman's calls for further reforms of the federal system, which include hiring a medical doctor to oversee the system and replacing disability examiners with licensed medical staff.

Schwartz noted that the board's ongoing use of independent medical consultants serves the same purpose and achieves "a cost savings . . . as doctors would undoubtedly be employed at a higher grade than RRB examiners."

He also rejected Dickman's recommendations that, in lieu of substantial reforms to the occupational disability program, Congress should eliminate it altogether or at least limit recipients to one year of benefits. Schwartz said the board is exploring new ways to prevent fraud and abuse.

"We believe the RRB is headed in the right direction to mitigate and remedy the avenues which were utilized to perpetuate fraud on our system," he wrote.

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