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Report on the delay by the MWHB in calculating arrears of superannuation payable by two Public Health nurses for previous service
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Published February 2006
Investigation Report on complaints made by Ms Mary Dillon* and Ms Patsy O'Sullivan* against the Mid-Western Health Board
Office of the Ombudsman
FEBRUARY 2006
This investigation arose out of complaints I received from two Public Health Nurses employed with the Mid-Western Health Board (now the Health Service Executive - Mid-Western Area). Three years after the date of their appointments, they received demands from the Health Board for superannuation arrears owing on previous reckonable temporary nursing service. In each case the arrears were calculated using gross salaries that were higher than those applicable at the date of their appointments. Had the amount been calculated at the actual time of their appointments then the arrears due would have been substantially less. The delay on the part of Health Board in calculating the arrears in each case was beyond the control of the complainants and both were financially penalised as a consequence.
The Health Service Executive accepted my recommendation that the complainants be paid lump sums of €2,500 and €5,000, respectively to compensate them for the delay in calculating their contributions to the pension scheme. It is my view that where a person has been wronged through an action of a public body, that that body should provide appropriate redress. Where an action of a public body results in a person suffering a financial loss, a compensatory payment should be made to help restore the person to the position he/she would have been if the public body had acted properly.
I am publishing this Report in order to highlight the importance of redress in circumstances where a delay on the part of a public body has caused financial loss. It is my hope that the lessons learned will help ensure that similar events will not recur.
The subject of this investigation is a delay by the Mid-Western Health Board in calculating the arrears of superannuation contributions payable in respect of previous non-pensionable (temporary, wholetime and part-time) service, in health board and voluntary hospitals, of two Public Health Nurses appointed to permanent/pensionable positions with the Board. This delay resulted in substantially higher costs being incurred by the complainants in paying the arrears.
In 1997, an agreement on the pay and conditions of nurses, incorporated in the Programme for Competitiveness and Work, adopted the principle that temporary nursing employment should be reduced to the minimum level consistent with operational requirements. With this in mind it was agreed that 1,700 Health Board nursing posts would be converted from temporary to wholetime permanent status through confined competitions. In addition to the confined competitions, open competitions were advertised nationally to fill permanent nursing posts in health boards
In May 1997, the Mid-Western Health Board announced a confined competition for the purpose of converting posts from temporary to permanent status in the following grades:
Ms Mary Dillon (not her real name) applied for the permanent position of Public Health Nurse, via the confined competition, on 30 May 1997, and, following an interview, she was advised, on 10 September 1997, that it was proposed to offer her a permanent wholetime position, subject to the completion of a medical examination. She was subsequently appointed to a permanent position of Public Health Nurse on 6 December 1997.
In October 1997, the Mid-Western Health Board placed an advertisement in the Sunday Independent inviting applications for permanent appointment to the position of Public Health Nurse by way of open competition. Ms Patsy O'Sullivan (not her real name) applied for the permanent position of Public Health Nurse on 30 October 1997 and, following an interview, she was advised on 9 December 1997 that she was being placed on a panel from which vacancies in the grade were to be filled. On 23 January 1998 Ms O'Sullivan was offered the position of Public Health Nurse. She was appointed with effect from 26 January 1998.
Persons appointed to a permanent wholetime post in a health board are eligible to join the Local Government Superannuation Scheme. Membership of the scheme is compulsory for any officer eligible to join it. The particulars of office relating to both of these posts required all persons, who became pensionable officers of the Board and who, like the two complainants, were liable in their new appointments to pay class A rate of PRSI contribution (fully insured), to make superannuation payments to the Board at a rate of 1.5% of their pensionable remuneration plus 3.5% of net pensionable remuneration. (Note: net pensionable remuneration means pensionable remuneration less twice the annual rate of social insurance old age contributory pension payable at the maximum rate to a person with no adult dependent or qualified children).
The rules governing the payment of superannuation contributions by fully insured permanent officers of health boards in respect of previous non-pensionable temporary wholetime and part-time service are contained in the Local Government (Superannuation) (Consolidation) Scheme, 1998. Under the Scheme it is compulsory for contributory members of the Scheme to have previous temporary wholetime and part-time health board service reckoned for superannuation purposes and to pay superannuation contributions in respect of such service. Under the terms of the Scheme, a member has also the option of reckoning non-pensionable service given in most other public service bodies e.g. non-pensionable service in a voluntary hospital, subject to the payment of the appropriate contributions. At the time of their appointments both Ms Dillon and Ms O'Sullivan had previous reckonable temporary nursing service and both were required to pay superannuation contributions due on all reckonable health board service.
Under Articles 64 (5) and 80 (2) (b) of the provisions of the Local Government (Superannuation) (Consolidation) Scheme, a fully insured officer, entitled to reckon a period of previous part-time or temporary wholetime service as service for pension purposes is required to make contributions in respect of such service at a rate levied on the person's pensionable pay at the time the contributions are being paid. In the case of fully insured officers, the method of levying of contributions, as provided for in the Scheme, is almost invariably consistent with how such contributions are levied in other public sector pension schemes in respect of similarly insured personnel.
Ms Dillon was advised on 19 October 2000, almost three years after the date of her appointment, that the total arrears payable in her case for superannuation contribution purposes in respect of her health board and voluntary hospital service would be £9,492.32 (€12,052.76). Ms O'Sullivan was advised on 1 February 2001, just over three years after the date of her appointment, that the total arrears payable in her case for superannuation contribution purposes in respect of health board and voluntary hospital service would be £12,587.49 (€15,982.82).
The arrears calculations were based on the salaries applying at the date they were advised about the amount due in each case rather than the salaries that applied at the time of their appointment. Both claimed that if the calculations had been made based on their salaries at the time of appointment their arrears bill would have been much less.
In light of the delay which had occurred in the calculation of arrears, they asked the Board to review their respective superannuation arrears with a view to obtaining a reduction in the amount being sought. When the Board refused to accede to their request they complained to me.
My Office sought a report from the Mid-Western Health Board on the two complaints. In the course of correspondence with the Board, my Office suggested that, on the basis of the evidence emerging from the examination, the Board might wish to consider making a compensatory payment to both complainants in view of the additional expense incurred by them as a result of the Board's failure to deal with the cases in a timely manner.
Responding to this request the Board advised me that in relation to Ms Dillon, while her date of appointment was 6 December 1997, her Permanent Appointment Order was not signed by the Board's Personnel Officer until 3 June 1999. According to the Board, its Superannuation Section is not made aware of new appointments until a copy of the Appointment Order, accompanied by the personnel file is received from its Recruitment Section.
The Board said that the Superannuation Section was not in a position to look at the file until November 1999. At that point Ms Dillon was issued with explanatory information relating to the Superannuation Scheme which informed her that contributions owing on previous reckonable temporary service would be levied on her pensionable pay at the time the contributions were being paid. This previous service would have to be verified by the respective bodies with whom she had been employed. Verification was received by the Board in October 2000 and Ms Dillon was subsequently notified of the cost of the contributions to be paid.
In relation to Ms O'Sullivan, the Board said that while her date of appointment was 26 January 1998, her Permanent Appointment Order was not signed by the Board's Personnel Officer until 21 May 1999. On 26 November 1998, Ms O'Sullivan was issued with the explanatory information relating to the Superannuation Scheme which informed her that contributions owing on previous reckonable temporary service would be levied on her pensionable pay at the time the contributions were being paid. At this point Ms O'Sullivan's personnel file was requested to be returned to the Recruitment Section and was not sent back to the Superannuation Section until after 21 May 1999.
Ms O'Sullivan was also advised that previous service would have to be verified by the respective bodies in which she had been employed. Verification was received by the Board in January 2001 and she was subsequently notified of the cost of the contributions owed in February 2001.
Rules and policy issues relating to the operation of the Local Government (Superannuation) (Consolidation) Scheme, under which superannuation contribution of officers of health boards are levied, are the responsibility of the Department of the Environment and Local Government (DoELG). On the question of compensation for the extra cost of the superannuation arrears bill, the Board indicated that it had sought clarification from DoELG, in November 2000, to see if it could waive the additional costs incurred. However DoELG advised that contributions payable are levied on the individuals pensionable pay at the time the contributions are being paid. The Board was further advised by DoELG that this is a statutory requirement and that the Department was not in a position to allow local authorities, including health boards, to depart from these statutory provisions.
I wrote again to the Board and explained that in suggesting that a compensatory payment might be warranted in these two cases, I did not wish the Board to depart from the statutory provisions of the scheme. I pointed out that it had taken the Board approximately three years to calculate how much the complainants would have to pay in additional superannuation contributions and that, as a consequence, because of salary changes in the interim, the arrears had increased significantly and were very much in excess of what would have been payable by them if their cases had been dealt with by the Board within a more reasonable timeframe. In this regard I said that the point at issue was the Board's delay in dealing with their cases and that it had nothing to do with the statutory provisions of the scheme.
I again asked the Board to consider the question of redress with a view to making a compensatory payment to both complainants reflecting the losses they had incurred. The Board responded by saying that it could not accede to this request. It pointed out that there were approximately 1,500 cases on hands where the issue of compulsory purchase of part-time and temporary service was involved and while not all of these were similar to the cases of the complainants, a sizeable proportion were.
In light of the Board's response I decided to commence an investigation of the complaints.
Following the commencement of the investigation I received a further similar complaint from Ms Iris Nolan*. Following receipt of Ms Nolan's complaint she was advised that I had already received two complaints relating to the same subject matter as her complaint and that it was intended to carry out an investigation of those complaints, under Section 4 of the Ombudsman Act, 1980.
In this regard Section 4 (6) of the Ombudsman Act, 1980 states that:
"It shall not be necessary for the Ombudsman to investigate an action under this Act if he/she is of opinion that the subject matter concerned has been, is being or will be sufficiently investigated in another investigation by the Ombudsman under this Act."
In accordance with this section of the Act, I concluded that it was not necessary to carry out an investigation of Ms Nolan's complaint. She was advised however that the circumstances of her complaint would be reviewed in the light of whatever recommendations I might make as a result of the investigation.
I should point out that complaints and disputes relating to occupational pension schemes are now subject to investigation by the Pensions Ombudsman, Mr Paul Kenny, who was appointed on 28 April 2003 under the Pensions Act, 1990, as amended by the Pensions (Amendment) Act, 2002. The commencement of this investigation predated the appointment of the Pensions Ombudsman.
. * this name has also been changed to protect the identity of the complainant.
Background
On 3 January 2003, I wrote to the Chief Executive Officer of the Mid-Western Health Board advising him of my intention to carry out an investigation of the complaints received under the provisions of Section 4 of the Ombudsman Act, 1980. I enclosed with my letter to the Chief Executive Officer, Statements of Complaint in respect of both complainants.
With regard to Ms Mary Dillon, the Statement of Complaint read as follows:
"Ms. Dillon was appointed to a permanent position in the Mid-Western Health Board on 6 December 1997. Under the Local Government (Superannuation) (Consolidation) Scheme, 1998 she was required to make contributions in respect of previous temporary part-time and temporary wholetime service. The provisions of the Scheme specify that contributions payable by fully insured officers are levied on the person's pensionable pay at the time the contributions are being paid.
The Board, by letter dated 19 October 2000, notified Ms. Dillon, some three years after her appointment, that the total arrears payable amounted to £9,492.32.
Ms. Dillon's salary had increased substantially from the date of her appointment to the date the arrears were calculated and notified to her.
The delay on the part of the Mid-Western Health Board in calculating the arrears of superannuation due in respect of her previous reckonable temporary service resulted in a substantially increased cost to the complainant with a consequent adverse effect for her.
The failure of the Board to advise the complainant of the relevant calculations, within a reasonable period of time, after her appointment to a permanent position is contrary to fair or sound administration."
With regard to Ms Patsy O'Sullivan, the Statement of Complaint read as follows:
"Ms. O'Sullivan was appointed to a permanent position in the Mid-Western Health Board on 26 January 1998. Under the Local Government (Superannuation) (Consolidation) Scheme, 1998 she was required to make contributions in respect of previous temporary part-time and temporary wholetime service. The provisions of the Scheme specify that contributions payable by fully insured officers are levied on the person's pensionable pay at the time the contributions are being paid.
The Board, by letter dated 1 February 2001, notified Ms. O'Sullivan, some three years after her appointment, that the total arrears payable amounted to £12,587.49.Ms O'Sullivan's salary had increased substantially from the date of her appointment to the date the arrears were calculated and notified to her.
The delay on the part of the Mid-Western Health Board in calculating the arrears of superannuation due in respect of her previous reckonable temporary service resulted in a substantially increased cost to the complainant with a consequent adverse effect for her.
The failure of the Board to advise the complainant of the relevant calculations, within a reasonable period of time after her appointment to a permanent position is contrary to fair or sound administration."
Two members of my staff subsequently met with the Board's Acting Director of Human Resources and Human Resource Manager to discuss the Statement of Complaint. At the meeting the Board's representatives accepted that delays had occurred in dealing with these cases and also with a considerable number of other cases.
They attributed the delay which had occurred to the fact that :
(i) it was necessary to check the previous service of the complainants with other agencies as they relied on other agencies to provide them with details of temporary and part-time service;
(ii) relatively new and inexperienced staff were responsible for carrying out the enquiries involved in the verification of previous service;
(iii) experienced staff were absent on unpaid leave and maternity leave;
(iv) the backlog of work on hands was increasing; and
(v) recruitment increased considerably in 1999, 2000 and 2001 (there had been 500 extra posts filled in 2001).
I later received the Board's formal response to the Statement of Complaint in which it set out the circumstances that gave rise to the complaints and elaborated on the reasons underlying the delay and steps taken to address it.
The Board explained that in 1999, following representations from staff and unions, a process of converting temporary posts to permanent posts was undertaken. This was part of a national agreement and, in the Mid-Western Health Board's case, involved some 350 staff nurse posts.
Since 1999, four permanent staff had left the Superannuation Section on promotion. It had not always been possible to fill the vacancies immediately. When the vacancies were filled, there was at least a six month induction period before the new staff member could become proficient in the processing of cases. There had also been a number of persons on maternity leave and special unpaid leave during the period in question, in addition to the normal profile of annual and sick leave for which locum cover could not be provided due to the specialised nature of the work.
Although one additional member of staff was assigned to assist with the problem, (and there were later additions to deal with the backlog), the effectiveness of these additional staff was reduced by delays in obtaining service records. Each previous employer had to verify the service record. Frequently, this might involve three or four written or telephonic reminders before a response was received.
The lead-in time for new staff to become productive is at least 6 months in relation to standard cases involving verification of minimum wholetime service, costing and checking and preparation of the statement of superannuation contributions due.
The Board advised that to facilitate staff awaiting statements of superannuation contributions due, an individual had the option, under an arrangement introduced in 2002, of commencing contributions by way of lump sum or additional periodic deductions from salary, pending notification of the final amount due. In addition tax relief, subject to conditions, was available on all superannuation contributions.
The Board repeated that it had asked the Department of Environment and Local Government about possible concessions to affected staff in respect of the delays. The Board was advised by the Department that it could not depart from the statutory requirement of the superannuation scheme.
The adverse affect - the loss incurred
The remuneration for the grade of Public Health Nurse at the time of the appointment of Ms Dillon and Ms O'Sullivan was as follows:
IR£20,397; £20,707; £21,056; £21,403; £21,633; £22,248; £22,863; £23,478; £24,093; £24,708 per annum.
Ms Dillon's salary at the date of her appointment was £21,403 (€27,176). The arrears in respect of reckonable superannuation service was payable at a rate of 1.5% of her pensionable remuneration plus 3.5% of net pensionable remuneration. (i.e. pensionable remuneration less twice the annual rate of social insurance old age contributory pension payable at the maximum rate to a person with no adult dependent or qualified children). Based on her salary at the date of her appointment i.e. £21,403 (€27,176) and the old age contributory pension rate applicable at that time, the arrears due for one year of reckonable service amounted to £785.25 (€997.06). Ms Dillon had a total of 9.329 years reckonable service. Accordingly her total arrears bill, at the date of her appointment, would have come to £7,325.57 (€9,301.56).
When the actual calculation of arrears in Ms Dillon's case were made, they were based on her salary as at April 2000 which was £27,366 (€34,710). On the basis of this salary and the old age contributory pension rate applicable in May 2000 the arrears due for one year of reckonable service amounted to £1,017.65 (€1,292.15). This amounted to a total £9,493.66 (€12,054.46) being due in respect of her of 9.329 years reckonable service an increase of £2,168 .09 (€2,752.91) when measured against the arrears due at the date of her appointment.
Ms O'Sullivan's salary at the date of her appointment was £22,248 (€28,249). The arrears in respect of reckonable superannuation service was payable at a rate of 1.5% of her pensionable remuneration plus 3.5% of net pensionable remuneration (i.e. pensionable remuneration less twice the annual rate of social insurance old age contributory pension payable at the maximum rate to a person with no adult dependent or qualified children). Based on her salary at the date of her appointment i.e. £22,248 (€28,249) and the old age contributory pension rate applicable at that time, the arrears due for one year of reckonable service amounted to £809.23 (€1,027.51). Ms O'Sullivan had a total of 10.132 years reckonable service. Accordingly her total arrears bill, at the date of her appointment, would have come to £8,199.12 (€10,410.73).
When the actual calculations of arrears in Ms O'Sullivan's case were made they were based on her salary as at April 2000 which was £31,859 (€40,452.59). Using this salary and the old age contributory pension rate applicable in May 2000, the arrears due for one year of reckonable service amounted to £1,242.28 (€1,577.37). This amounted to a total £12,586.78 (€15,981.91) being due in respect of her 10.132 years reckonable service, an increase of £4,387.66 (€5,571.18) when measured against the arrears due at the date of her appointment.
The Health Board Superannuation Section
In accordance with Articles 63, 64 and 80 of the Local Government (Consolidation) Scheme and Circular letter S1/97, the Health Board was obliged, in respect of all fully insured officers appointed by the Board, to collect superannuation contributions due on all reckonable temporary part-time and whole-time health board nursing service posts. Appointees also had the option of having their relevant nursing service in voluntary hospitals reckoned for superannuation purposes subject to payment of the necessary contributions. The purchase of such service was not compulsory. The superannuation contributions owing to the Board in respect of this service were calculated on the same basis as the contributions owing on health board service.
The Board said that it had to verify that the appointee had the relevant qualifying service. Obtaining verification could be reasonably straightforward with a short turnaround time but could also be the subject of lengthy and complex enquiries particularly in relation to verification of part-time service.
In the Mid-Western Health Board, Superannuation Section notified relevant personnel of the cost of purchasing this service following their appointment. The objective was to inform individuals of the cost of the arrears purchase as soon as possible following appointment. However during this period there had been substantial increase in numbers of service related posts filled with end of year figures increasing from 4,403 in 1999 to 6,216 in 2002.
The Board said that between 1999 and 2003, the staff situation in the Superannuation Section had contributed to delays in verifying qualifying service. In this period four permanent staff left on promotion. The consequent vacancies took time to fill and new appointees required a period of training of up to six months to become proficient in the work of the section. In addition during this period staff were absent on maternity leave, unpaid special leave, sick leave and annual leave for which locum cover could not be provided because of the specialised nature of the work.
In order to facilitate staff awaiting statements of superannuation contributions, the option was made available of making contributions by way of deductions from salary pending notification of the final amount due. The Board also asked the Department of the Environment and Local Government whether concessions could be made in respect of delays but the advice received was that the provisions of the Scheme could not be breached.
The actions of the Mid-Western Health Board
By arrangement with the Board, the arrears due in respect of Ms Dillon's and Ms O'Sullivan's reckonable service could have been payable in either a lump sum or alternatively, by paying contributions, as an addition to standard main scheme contributions, over a period corresponding to the actual length of previous service.
Following her appointment, Ms Dillon had approached the Board to request that a deduction be made from her salary in respect of arrears of superannuation contributions. The deductions commenced in April 1998 at the rate of £150 per month and by the time the actual calculation of arrears was made in October 2000, Ms Dillon had paid £3,900 to the Board. As was mentioned earlier, the arrears due for one year of reckonable service amounted to £1,017.65 based on her uprated salary at the time of calculation and the £3,900 paid to the Board equated to 3.83235 years service. This left a balance of 5.497 years arrears to be paid. However, this arrangement was of little benefit to Ms Dillon because when the arrears due were determined, they were based on her uprated salary at the date of calculation and the advance payments made were translated into credits for service, the costing for which, reflected her uprated salary.
Recognising the problem which had arisen from the delay in dealing with the backlog of cases the Board's Superannuation Section consulted with the DoELG to see if any concessions could be made. In a letter dated 28 November 2000, the Board wrote:
"In view of the fact that the Superannuation Section received 290 New Appointments in 1998, 370 New Appointments in 1999 and 277 New appointments this year, resulting in a substantial delay in dealing with these appointments, I would be grateful if you could advise if there could be any concession given to deal with this backlog. A substantial portion of the New Appointments are covered by Class A1 PRSI and possibly have been promoted since original appointment"
On 5 December 2000, DoELG replied that
"in the case of previous temporary part-time and temporary wholetime service contributions payable by fully insured officers are levied on the person's pensionable pay at the time the contributions are being paid. This is a statutory requirement and the Department is not in a position to allow authorities to depart from the statutory provisions"
In light of the Department's advice the Board concluded that it had no discretion to waive the additional costs incurred by the complainants.
The Department's advice
Article 80 (2) (b) of the Local Government (Superannuation) (Consolidation) Scheme, 1998, provides that, in the case of fully insured officers, superannuation contributions in respect of temporary wholetime service with a local authority, including a health board, prior to becoming pensionable, are levied on a person's pensionable pay at the time the contributions are paid. In the case of fully insured officers, the method of levying contributions is almost invariably consistent with how such contributions are levied in other public sector pension schemes.
The text of Article 80 (2) (b) of the Local Government (Superannuation) (Consolidation) Scheme, 1998 is as follows:
"A registered officer of a local authority who is fully insured and who, pursuant to sub-articles (4) and (5) of article 63, becomes entitled to reckon a period or periods of wholetime service as a temporary officer of a local authority shall contribute to his or her employing local authority for the purposes of the said sub-articles (4) and (5) at the rate of -
(i) three and one-half per cent. of the amount by which, at the date of payment of the contribution" (my emphasis)
The Department advised me that in 1997, arising from the introduction of full PRSI for officer grades and following queries received from local authorities and health boards, it had issued a number of circular letters clarifying issues which had arisen. In particular, it addressed how the contribution liability in respect of temporary wholetime and part-time service prior to becoming pensionable was calculated and how such liability could be paid.
The relevant circulars are S.1/97 of 31 January 1997 (paragraph 6) and S.7/97 of 13 May 1997. Paragraph 6 of S. 1/97 says:
"In relation to main scheme benefits, contributions for previous temporary wholetime service in respect of members covered by the provisions of the circular letters should be levied on uprated salary and emoluments i.e. the rate of remuneration the person is in receipt of at the date of payment of the contributions"
The Circular gave an example of how the liability could be calculated.
Circular letter S7/97 was issued by the Department as a consequence of some further enquiries having been received concerning the application of paragraph 6 above. Included in the letter was the following comment:
"Notification to officers concerned of contributions liability in respect of previous temporary wholetime service and part-time service should be made as soon as possible after the officer becomes pensionable and should make it clear that contributions liability will increase in line with increases in the officer's pay. A copy of this circular should be given to each officer concerned."
By use of examples the Circular outlined the ways in which the liability could be paid.
Comment
It is clear from the discussions held by the DoELG with the Health Boards and the Circular Letters S.1/97 and S.7/97 which were issued by DoELG,
While those affected by the contribution liability may have been aware that delays in calculating the level of liability would have implications for the amount they would ultimately have to pay, effectively there was nothing they could do about it. It was open to them to initiate a personal payment arrangement but ultimately, as is mentioned earlier, this was of no benefit to them in real terms.
The fallout from the failure of the Board to make the relevant calculations in respect of contribution liability in reasonable time has undoubtedly adversely affected the two complainants financially. It might be argued that, in the case of Ms O'Sullivan, she had received an advantage, arising from the delay on the part of the Board in calculating her superannuation liability, in that her salary was not subject to any deductions on appointment and as a consequence, her actual income and consequent spending power was increased. However, this marginal advantage was more than offset by the level of deductions made later on her uprated salary. In Ms Dillon's case, she had, as is mentioned at paragraph 4.2, arranged to have deductions made from her salary at the rate of £150 (€190.46) per month with effect from April 1998.
The question arises as to what other options, if any, were open to the Board to lessen the adverse affect arising out of its inability to advise individuals of their exact liability. The only options exercised by the Board was to make a facility available whereby deductions could be made from salary pending notification of the final amount due and to ask the Department of the Environment and Local Government whether concessions could be made in respect of delays. Neither of these options resulted in any positive benefit to the complainant.
In the course of my investigation of the complaint I asked the Department to indicate whether there was a statutory obligation on the Health Boards, under the Local Government (Superannuation) (Consolidation) Scheme, 1998, to verify all relevant qualifying service before commencing superannuation arrears deductions. In other words could a Health Board commence deductions on appointment on the basis of the qualifying experience claimed by the appointee and make whatever adjustments, where necessary, at a later date to the deduction rate in respect of non-qualifying or additional qualifying service when verification has been completed?
In its response the Department said:
"Under the Local Government Superannuation Scheme (LGSS) there is no statutory obligation on health boards to verify all relevant qualifying service before commencing the deduction of arrears of superannuation contributions. However, generally speaking the practice would be to verify the service before billing the person concerned."
This suggests that the Board could have assessed the amount payable in respect temporary wholetime and part-time service on the basis of the amount of service actually claimed by each individual. In this context payment could have commenced at a much earlier date with verification of the service to follow. Under such an arrangement the onus would be on the individual to ensure that details of all reckonable service were provided and in the course of the verification process adjustments, where applicable, in the form of refunds could be made to cater for non-reckonable service claimed and extra contribution payments in respect of reckonable service not claimed.
I raised a second issue with the Department. This concerned persons who made advance payments of their contribution arrears, prior to their service being verified, by arrangement with the Mid-Western Health Board. In such cases, I asked whether the actual contributions, when finally calculated, should be based on the salary payable at the time the advance contributions commenced or when the qualifying service was verified. This was a relevant issue given that contributions were calculated on a person's salary at the time contributions were being made.
According to the Department there is no provision under the LGSS which allows for the contribution method used by the Mid-Western Health Board i.e pending verification of service, the person can contribute a fixed sum per paydate which is ultimately offset against the liability calculated on the pensionable pay applicable at the time the service is verified, and allow the person to pay the outstanding balance over the total period of reckonable service in question. Accordingly, it would seem to me, that the question of basing contributions on the salary payable at the time the advanced contributions commenced, does not arise.
The Department also advised me that it had been contacted by the trade union Impact, in 2003, in connection with the delays by the Board in notifying certain members of their contribution liability. The Department examined the matter and wrote to the Board stating that, while the Board had indicated that the delay in such cases had arisen due to a large number of appointments, high levels of turnover of experienced staff and long training times for new staff, it was unacceptable that individual employees should be penalised for such delays.
The Department advised that every effort should be made by the Board to notify fully insured officers of their contributions liability as soon as possible after they become pensionable and added that, as an interim measure, pending verification of previous temporary service, the Board should give such officers an estimate of their contributions liability and give them the option of paying for this by lump sum method or by paying extra periodic contributions. The Department indicated to the Board that the only information required to determine the lump sum contribution is pensionable pay on appointment, rate of Old Age Contributory Pension on appointment and length of previous service (estimate of same if necessary). Any necessary adjustment could be made on verification of the previous service. As an alternative, the person should be given the option of paying a multiple of their standard superannuation contribution. For example, a decision to double the standard contribution would mean the liability would be paid off in a period of time equal to the length of the previous service. Once again, any necessary adjustments could be made when the actual length of previous service was verified.
In conclusion, the Department said that the Board should take the necessary steps to ensure that contributions liability is assessed and notified to new staff immediately following appointment, even on an interim basis as outlined above.
Responding to my draft investigation Report, the Board advised me that calculating such an estimate would have been as time-consuming as producing the complete bill. However I do not accept this contention, as, in my view, it would have been a relatively straightforward procedure to give newly appointed staff an estimate of their potential contribution profile based on the service claimed by each appointee. Any shortfalls or overpayments made could have been rectified when service had been verified without any significant financial loss to the person appointed or the Board. It also represented good administrative and accounting practice in that it would have provided much needed revenue to the Board at an early stage.
In light of the above I asked the Department whether, to its knowledge, the Board had implemented a system of deductions based on the interim measure suggested above pending verification of previous temporary service. The Department was informed by the Board on 29 November 2004 that such a system had not been implemented. The Department indicated it had recently been informed that, following changes to the payroll system in use by the Board, an arrangement had been put in place which enabled staff, who notify the Board that they wish to commence paying contributions towards their temporary/part-time service pending official notification of their bill, to have additional periodic deductions made from their salaries. These deductions take the form of a set percentage of pensionable remuneration/net pensionable remuneration per pay date, the payment of which decreases, in part or in full, the periods of service that is owed for. This arrangement is in accordance with paragraph (d) of Circular Letter S. 7/97.
I also asked the Department why it had not suggested alternative interim arrangements for deductions pending verification of previous temporary service when the Board had enquired in November 2000 whether any concession could be given to deal with the backlog of cases. I was advised that the main stumbling block was the limitations of the Board's payroll system in not being able to cater for the payment of periodic contributions. I was further advised that subsequent to the issue of Circular Letter S1/97, a meeting between the Department and the Personnel Officers of health boards on a range of superannuation matters took place on 26 February 1997. Because of the difficulties associated with implementing the new contribution arrangements in respect of health board staff paying Class A rate PRSI, mainly due to the number of staff appointed since April 1995, it was agreed that the new system of paying contributions for past temporary/part-time service on current pay would apply to all those appointed on a full PRSI basis since 31 January 1997. The old system whereby contributions are paid on historic rates of pay would apply to all those appointed on a full PRSI basis between 6 April 1995 and 30 January 1997 provided such staff were notified of their liability (i.e. billed) before 31 May 1997. This was a once-off, interim arrangement specific to the health area that was put in place to clear the backlog of cases which had arisen. However, there had been little progress in the matter. In November 2000 the Department took the view that it was being asked whether the Board could deviate from the requirements of the Scheme. The Department's view was that
Conclusions
Given that the Board was aware that its actions in delaying calculations of superannuation arrears due would have serious cost implications for its own staff the evidence suggests that it displayed no urgency in making efforts to ameliorate the damage resulting from its inaction.
I acknowledge that staffing difficulties in the Superannuation Section did not help the situation and I would be slow to attribute blame to the Section for what happened. Rather, the evidence suggests that what happened here is more attributable is an overall failure of management systems within the Board which were unable to deal with a problem the Board had been forewarned about on numerous occasions.
The Board chose to ignore the implications of its inactions for its own staff who were effectively helpless in the circumstances. The scheme eventually put in place by the Board for early payment of the arrears was of no practical value to persons affected.
I find that, in failing to have put in place appropriate administrative arrangements to enable relevant officers to make the necessary payments in respect of superannuation contributions due on qualifying previous service, the Mid-Western Health Board had acted in a manner which adversely affected the complainants and which was contrary to sound administration. This finding is supported by the following conclusions:
(a) the Board had sufficient time to put the appropriate arrangements in place:
- even before the issue of Circular Letters S 1/97 (31 January 1997) and S 7/97 (13 May 1997) the Department of the Environment and Local Government had held regional superannuation seminars attended by health area pensions practitioners during which the issue as to how the contribution liability in respect of temporary whole time and part-time service should be calculated was addressed;
- Circular Letters 1/97 and S 7/97 clearly stated that contributions for previous service should be levied on uprated salaries. They clarified that this meant the rate of remuneration the person is in receipt of at the date of payment of the contributions and clearly stated that contributions liability would increase in line with increases in the officer's pay:
(b) The Board's internal communications were deficient in relation to the appointment of new officers:
- in this regard the key documentation relating to the appointment of these two officers - the Permanent Appointment Order - which, following signature by the Personnel Officer, is copied to, among others, the Payroll Supervisor, Department Head/ Local Administrator and the Superannuation Officer - was signed long after appointments were actually made ( 17 months in the case of Ms O'Sullivan and almost 18 months in the case of Ms Dillon).
(c) The system eventually put in place by the Board to enable officers to commence contributions in advance of a determination of their exact liability was of no benefit to them and was not provided for under the Local Government Superannuation Scheme. When an alternative was suggested by the Department of the Environment & Local Government in August 2003, the Board did not act upon the suggestion.
I find that the actions of the Board in respect of the two complainants resulted in their being treated in a manner which was both unfair and unreasonable and as a consequence both incurred financial losses through no fault of their own.
I find that both complainants were required to pay additional amounts of superannuation arrears as a direct consequence of the inaction of the Board.
The Health Service Executive Mid-Western Area was established on 1 January, 2005 and took over the functions formerly undertaken by the Mid-Western Health Board. I have therefore directed my recommendations to the new Executive.
In considering my proposed recommendations I consulted with the Pensions Ombudsman who will have responsibility for the examination of complaints of this nature in the future, and whose determinations, unless appealed to the High Court within 21 days of the date of determination, are binding. The Office of the Pensions Ombudsman agreed that my proposed recommendations were appropriate.
My recommendation is that each of the complainants should be paid a compensatory amount in recognition of the adverse affect suffered in each case. The formula I have used to calculate the compensation due is based on the difference between the amount of pension contributions payable at the date of appointment and the amount payable at the date the contributions were actually calculated, as set out at Section 4.1 of this Report.
For convenience, and to ease the task of calculating the amount due in each case I have decided that the period in respect of which payment should be made should commence on the first day of the month following appointment and end on the last day of the month prior to the date on which advice was given about the contributions due. From this period, a deduction can be made in respect of the time which might reasonably have been allowed for calculation of the pension contributions following appointment. I have recommended a period of three months for this purpose. The balance due should be awarded to the individuals concerned, either as a lump sum payment, or credited against any outstanding pension liability which they may have.
Before finalising the investigation Report, the Executive was afforded an opportunity, in accordance with the provisions of Section 6(6) of the Ombudsman Act, 1980, to consider a draft of the Report and to make whatever representations it wished in relation to it. In its response the Executive said that, while it was sympathetic to the difficulties experienced by the individuals concerned, it was not in a position to contravene the terms of the DoELG Superannuation Scheme. It added that, in the event of it receiving approval from the DoELG to make compensatory payments, it would be happy to do so. In this connection I feel that it is again necessary for me to state that my recommendations are made in respect of specific instances of maladministration identified in my investigation of these complaints and are not related to the provisions of the DoELG Superannuation Scheme.
Ms Dillon
The difference between the amount of pension contributions payable at the date of appointment and the amount payable at the date the contributions were actually calculated = €2,752.91
Date of Appointment: December 1997
Date of advice of pension contribution payable: October 2000
Difference in months (starting on the first day of the month following appointment and ending on the last day of the month prior to the date on which contribution advice was given i.e. January 1998 - September 2000): 33
Less deduction (three months) for period calculation of the pension contributions following appointment = 30
Compensation: = (€2,752.91 /33) X 30 = €2,502.65
Ms O'Sullivan
The difference between the amount of pension contributions payable at the date of appointment and the amount payable at the date the contributions were actually calculated = €5,571.18
Date of Appointment: January 1998
Date of advice of pension contribution payable: February 2001
Difference in months (starting on the first day of the month following appointment and ending on the last day of the month prior to the date on which contribution advice was given i.e. February 1998 - January 2001 ): 36
Less deduction (3 months) for period calculation of the pension contributions following appointment: 33
Compensation: €5,571.18 /36 X 33 = €5,106.92
In the case of Ms Iris Nolan (Section 2.9 of the Report) compensation should be calculated on the basis of the formula set out at 6.1
In the case of the two complainants the amount of the payment due will be:
The HSE subsequently wrote to me confirming that it intended to implement my recommendations.
As outlined at Section 2.9, complaints and disputes relating to occupational pension schemes are now subject to investigation by the Pensions Ombudsman. I understand that he has received complaints similar to those dealt with in this Report and, where appropriate, he is applying the redress formula recommended in Section 6 of this Report.
Emily O'Reilly
Ombudsman
October, 2005