Item - 2012.AU7.10

The Audit Committee recommends that:

1.         City Council request the Director, Pension, Payroll and Employee Benefits, in consultation with the City Solicitor, to formally request the City’s benefit administrator to provide statistical data and reports related to suspected and actual incidents of benefit fraud by employees and/or their dependants that have been investigated by the benefit administrator.

2.         City Council request the Director, Pension, Payroll and Employee Benefits, give consideration to the formal documentation of an annual evaluation of the benefit administrator performance as it relates to prevention, detection and investigation of benefit fraud including fraud related to the receipt of Long Term Disability benefits.

3.         City Council direct that a copy of this Item be forwarded to the Employee and Labour Relations Committee.

The City of Toronto and its Agencies, Boards and Commissions provide employee health care benefits for its employees and retirees, as well as to their spouses and eligible dependants.  Pension, Payroll and Employee Benefits Division (PPEB) is responsible for administering the employee benefit plans including the City’s Long Term Disability program (LTD), for those individuals employed directly by the City (i.e., Toronto Public Service) employees.

The City provides, through its benefit administrator, Manufacturer’s Life Assurance Company (Manulife) extended health care, dental care and long term disability coverage on an Administrative Services Only basis.  The City is self insured which means the City reimburses Manulife for the actual benefit claims paid to employees and pays administrative fees for their processing and adjudication services.

Administration of the City’s Benefit Plans by Manulife includes prevention and detection of fraud and investigation services.

There is a need to improve Manulife’s reporting to the City with respect to incidents of benefit fraud by employees and their dependants, that Manulife has investigated.  Improved reporting by Manulife should include statistical data and reports to enable the City to consider trends and patterns which may indicate fraud or abuse of benefit claims.  This will also enable the City to assess the performance of the benefit administrator, as it relates to its responsibility to prevent, detect and investigate benefit fraud including fraud related to the receipt of LTD benefits.

This report contains two recommendations to improve the reporting and monitoring of benefit fraud, along with a management response to each of the recommendations.