Item - 2016.AU7.1

The Audit Committee recommends that:

1.  City Council request the Director, Pension, Payroll and Employee Benefits Division to review Manulife’s Plan Document in administering the City’s Long Term Disability (LTD) claims to ensure that the Plan Document provisions are consistent with the City’s Collective Agreements and related policies.  Where practices are deemed appropriate that are not consistent with the Collective Agreements, staff of Legal Services and Human Resources should be consulted to assess the financial impact and legality of continuing such practice.

2.  City Council request the Director, Pension, Payroll and Employee Benefits Division to develop and implement appropriate processes and protocol for significant changes to Long Term Disability (LTD) benefit policy and the benefit administrator's Plan Document. Such processes and protocol should include adequate consultation with City Legal and other pertinent staff, documentation in accordance with the City's Records Retention By-Law, and appropriate City authorization prior to implementation by the benefits administrator.

3.  City Council request the Director, Pension, Payroll and Employee Benefits Division to:

a.  Undertake a detailed review of Long Term Disability (LTD) active claims from seasonal employees to ensure the benefit payments are calculated accurately and in accordance with the City's LTD Policy.

b.  Consult with Human Resources and City Legal to determine the appropriate action and steps to immediately apply adjustments to future payments for claims where inaccurate payments are identified.

c.  Ensure City staff responsible for claim payment calculation have complete and correct understanding of how LTD pre-disability earnings should be calculated.

4.  City Council request the Director, Pension, Payroll and Employee Benefits Division in consultation with City Legal and other pertinent staff, to assess the appropriateness and feasibility of recovering the overpayments from active claimants.

5.  City Council request the Director, Pension, Payroll and Employee Benefits Division to:

a.  Clarify the definition of 'totally disabled' in the Long Term Disability benefits policy and the effect of performing modified work during the qualifying period.

b.  Develop procedures and training to ensure City staff involved in managing the Long Term Disability benefits program have complete and correct understanding of the eligibility requirements.

6.  City Council request the Director, Pension, Payroll and Employee Benefits Division to ensure City staff involved in managing the Long Term Disability benefits program timely complete the Plan Sponsor Statement, to avoid unnecessary delays in the adjudication process.

7.   City Council request the Executive Director, Human Resources to review the City's current short term disability management program for early and pro-active intervention opportunities, to reduce the risk of employees progressing to Long Term Disability leave.

8.   City Council request the Executive Director, Human Resources to review the existing return to work processes for employees on Long Term Disability leave with a view to improving the return to work success rate and turnaround time.

9.   City Council request the Executive Director, Human Resources to consider increasing the contracted resources for Physician and Psychiatrist such that they can effectively and timely facilitate the return to work process for employees on Short Term Disability and Long Term Disability leaves.

10.  City Council request the Executive Director, Human Resources to develop a tracking system to monitor the City's work search efforts for employees returning from Long Term Disability leave and identify improvement opportunities.

Beverly Romeo-Beehler, Auditor General, and Jane Ying, Assistant Auditor General, gave a presentation to the Audit Committee on this Item.

This report provides the results of the Auditor General's Phase Two review of the City Long Term Disability (LTD) benefits program, including the key findings and recommendations from the interim audit report.  The interim report was submitted to the Audit Committee in July 2016 and it provided the results of our review of a sample of LTD benefits claim files administered by Manulife:

http://www.toronto.ca/legdocs/mmis/2016/au/bgrd/backgroundfile-94773.pdf

The Auditor General’s 2015 Audit Work Plan included an audit of the City’s management of LTD benefits.  The audit was divided into two phases.  Phase One, which focused on how City staff managed the LTD benefits was completed in October 2015, and the audit report was submitted to the Audit Committee in October 2015:

http://www.toronto.ca/legdocs/mmis/2015/au/bgrd/backgroundfile-84556.pdf

This Phase Two final report contains a total of 19 recommendations to help the City improve oversight and adopt a more proactive approach to managing the LTD benefits program.  Of the 19 recommendations, nine are contained in an Interim report which has already been adopted by the Audit Committee in July 2016.  The ten new recommendations in the final report are listed below.