Questions linger over amount wasted due to erroneous stipend payments in Teaneck

In February, township officials said they conducted an internal survey of employees who received the annual stipends, which have been under criticism for more than a year and originally ranged from several thousand dollars to more than $10,000 per worker. The survey found that ineligible employees had received the payments, leading to changes that formalized how they are administered and capped at $5,000 the annual amount each worker could receive for opting out of coverage.

Questions have lingered over how much has been wasted since the payments to the ineligible employees were discovered, as the figure likely is significant. In 2015 alone, Teaneck paid a total of more than $415,000 to 49 employees who had elected not to take health care through the township. According to Teaneck’s most recent audit from June, 19 of those employees never should have received those funds.

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But figuring out exactly how much was wasted is likely to be difficult if not impossible. Recent responses to requests for public records from the state and township indicate that neither kept all of the information about who opted out of health care in the past.

Like many New Jersey municipalities, Teaneck offers health insurance to its employees through the publicly funded State Health Benefits Program. As an incentive to encourage employees to seek health care elsewhere, the state allows municipalities to offer stipends — a maximum of $5,000 for anyone who signed up after 2010 — to those who waive coverage.

However, state law also says that these employees are ineligible for the stipends if they are still covered in some other way — as a dependent on a spouse’s plan, for example — by the State Health Benefits Program or a similar one for public educators. The intent was to prevent public employees from receiving a stipend if they were receiving publicly-funded health care.

The program has been in place for years, but the statue governing it changed in 2010. Earlier this month, the state issued a local finance notice rehashing the state law that permits the stipends, noting that some local governing units “may not be aware of the statutes and regulations pertaining to health benefit waiver payments.” The notice also “strongly” called on governing bodies to review their policies to see if they are still “fiscally prudent,” as public employees are contributing more to their health care plans.

Every month since December 2012, the state Treasury Department has provided a report to municipalities that insure their employees through the State Health Benefits Program. The reports detail which employees have waived coverage through the state health care plan, and a column indicates whether those employees have alternate coverage with the state — making them ineligible for the stipends. Copies of the reports were provided to The Record after a Superior Court judge in May forced Teaneck to release certain health care-related documents.

Teaneck officials never publicly acknowledged the reports, saying in February that the issue of the payments to ineligible employees had been discovered through an internal survey that the administration elected to undertake. The township stopped all payments for that month and adopted measures to prevent such payments from being issued in the future, including mandating that employees must certify every year who their benefits provider is. The move is expected to save the township $280,000 a year, Township Manager William Broughton said at the time.

One critic of the way the township has handled the waiver payments, Councilman Alan Sohn, said the existence of the reports raises questions about whether the township could have eliminated the waste sooner.

“As it turns out, the state has been notifying the township from Day One that there were employees [who] fell into this category, and that’s what really concerns me,” Sohn said.
Broughton said the reports identify who may be ineligible for the waivers.

“That was a report that was missed by the responsible person … it obviously wasn’t anything that was intentional,” he said. “It’s something that we’re glad that we have caught and remedied the issue, and even in spite of that staff error, the township was still able to save money on health benefits costs.”

Broughton estimated that the township still saved more than $1 million in health care costs by offering the waivers.

Township Attorney William Rupp said in a recent interview that he learned about the reports earlier this year after searching for documents in response to a public records request.

Rupp noted that the reports are incomplete for the township’s purposes. Through documents provided by the township in response to the judge’s ruling, The Record cross-referenced the employees who received waivers with those who were named in the reports for December 2015 and January 2016. That analysis indicated that only 12 ineligible employees had received payments, at a combined cost to the township of more than $20,300. The township’s internal survey and the audit found seven additional ineligible employees; their names have not been made public.

“That list indicates who is waving coverage,” Rupp said, adding, “That required the township to undertake a more extensive survey.”

But Councilman Jason Castle, an ally of Sohn’s, said the reports reveal a flawed process.

“We didn’t do anything,” Castle said of the survey. “We had the information from multiple sources – the employee, the state, the interpersonal relationships that exist in the building. We had the information.”

But calculating how much has been paid to ineligible employees since 2008, when Teaneck began issuing the payments, may be hindered because of another reason: Teaneck and the state have copies of the report only from July 2015 to present.

The state “only keeps these records for a 12-month period,” Peter Simon, the Treasury Department’s chief of staff, said in an email. “We instruct employers to download or print copies to keep for their records.”

In response to a public records request, Teaneck provided only the names of employees who received the payments — and how much they received — for 2012 to present. For 2008 to 2011, Teaneck provided payroll reports that do not detail individual employees or their stipend amounts.

Broughton said it would require “significant research” to determine how much was lost through the improper payments, such as going through individual payroll records for each employee. He said he has not determined how much money could have been paid out incorrectly.

“The key is that we fixed the problem,” Broughton said.

The issues with the payments surfaced a year ago, when an auditor uncovered a separate problem with them that was quickly resolved. The township was paying 17 employees, who also have not been identified publicly, stipends that exceeded the state maximum of $5,000 — an employee oversight, according to the audit.

The internal survey, which found the ineligible employees, was conducted only after Sohn, Castle and some residents repeatedly called for the township to lower the payments or abolish them.

In April, the council adopted an ordinance that significantly cut back the amount the township spends on the stipends. In January, 49 employees were paid a total of more than $35,000 not to take insurance through the township. No employees were paid the stipends in February, and in May, 27 employees were paid just over $14,000 not to take health care.

Since the improper payments were discovered, one resident, Art Vatsky, has been vocal about wanting to get his taxpayer dollars back — something the council has not discussed publicly. In an interview, Vatsky said he doesn’t blame the employees who received the money for the error as it appears not to have been their fault. But he said the taxpayers deserve to be repaid.

Vatsky also called for an internal investigation to understand just where the township went wrong.

“These employees were getting money over and beyond what they were entitled to,” he said, adding, “Get it back.”

Email: diduch@northjersey.com