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The Arkansas Teacher Retirement System is seeking the repayment of more than $323,000 in retirement benefits incorrectly paid to two deceased out-of-state members, the system's executive director told lawmakers Wednesday.

Clint Rhoden said a national law firm with offices in Oklahoma has been retained to represent the system in trying to recover the funds through court judgments.

But he also said, "There has to be assets in which to get a judgment against."

Afterward, he said the law firm Kutak Rock is representing the system in both lawsuits, which are expected to be filed soon.

In February, lawmakers learned from Arkansas Legislative Audit that the system discovered the payment of retirement benefits weren't discontinued when the two members died, resulting in overpayments of more than $306,000 over 20 years in one case and more than $17,000 in the other case.

One death was not reported to the system by the member's survivors, while the notation of the other death was not correctly entered by the agency.

The system identified these overpayments through the implementation of new procedures, Deputy Legislative Auditor Tom Bullington said in February about an audit of the retirement system for fiscal 2019.

During lawmakers' budget hearings of state agencies in advance of next year's regular session, Sen. Kim Hammer, R-Benton, asked Rhoden for an update on these two overpayments and what other overpayments have been made by the system in the past two years.

Rhoden said these two cases "represent the major bulk" of overpayments in the past few years.

He said the system found retirement benefits were paid this year after another member's death.

"That one has much better news than these two in the sense that the family members did not withdraw that money out of the bank account and we were able to recover that with no effort, and that was about $22,000," Rhoden said. That's the only three cases that the system knows about at this time, he said.

"We are actively researching, doing a real deep dive into our retirees and looking for these type of overpayments, particularly if the retirees live outside of Arkansas," he said.

Rep. Marcus Richmond, R-Gravelly, asked Rhoden whether the system referred the overpayments to a prosecutor because he said, "With that many years, they realized that their relatives had passed on."

Rhoden said the system's first legal move was to contact the FBI since "it was across the state borders" and the FBI conducted a thorough investigation.

The FBI has declined to press charges, but that hasn't stopped the system from seeking recovery of the overpayments, he said.

Rhoden said, "We are pursuing that $306,000 aggressively."

Rep. Jim Wooten, R-Beebe, said, "In my part of the country, that's a lot of money."

Rep. Fran Cavenaugh, R-Walnut Ridge, said, "You overpaid this for 23 years. After 23 years, what made you catch it?"

Rhoden said the system has roughly 30 retired members who more than 100 years old and the system was able to prove that all but one of them were still alive.

Then, Cavenaugh asked, "so how old was this person supposed to be when you found them?"

Rhoden replied, "I don't know exactly, about 110 I think.

"Up to that point, that was the oldest member in the system," he said. "At this point, we have a member that is 106 years old."

Rhoden said the system has a number of sources of information to find out if a member who lives in Arkansas dies.

"What we have determined in this analysis is really we need to focus on our out-of-state retirees," he said.

The system started a program to send out benefit verification letters that must be notarized and returned to the system, and the system is now focused on sending those letters to out-of-state retirees, Rhoden said.

"We are in the middle of that process. We sent out about 4,000 letters in July. We got about an 88% responses rate on that. We are sending a second batch for about 400 or so, so basically that process will end and, if we don't get a response, their benefit will be suspended, and that usually generates phone calls to me and we resolve them one at a time," he said.

The Teacher Retirement System is state government's largest such system with more than $17 billion in investments and more than 100,000 working and retired members.

As of June 30, 2019, the system included 68,457 working members who are not in its deferred retirement plan, with an average annual salary of $39,065; and 3,707 other working members who are in its deferred plan, with an average annual salary of $62,812, according to system actuary Gabriel, Roeder, Smith & Co. The system also included 48,677 retired members with an average annual benefit of $23,588.


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