Employees Retirement System
An Audit Report on Management Controls at the Employees Retirement System of Texas
February 1998
Report Number 98-024
Overall Conclusion
Opportunities exist for the Employees Retirement System of Texas (System) to enhance controls used to monitor customer satisfaction, health maintenance organization (HMO) contract compliance, and compliance with the Texas Employees Uniform Group Insurance Benefits Act. These enhancements could impact accomplishment of the System's mission and future funding and benefit decisions. Overall, however, management controls appear sufficient to provide reasonable assurance that the System will accomplish its mission.
Key Facts and Findings
The System's four pension plans paid benefits of $549 million and insurance programs incurred expenses of $937 million in fiscal year 1997. These programs respectively served approximately 220,000 and 500,000 current and former state employees, beneficiaries, and dependents.
The System should strengthen and expand processes for monitoring satisfaction of its customers. Accurate identification of customer satisfaction is important to the achievement of the System's mission and may become more significant if projections of insurance funding needs require consideration of benefit changes. Available information, although limited, indicated high levels of satisfaction with retirement processing and relatively few complaints about benefit programs.
The System's procedures do not ensure that HMOs comply with many contractual provisions. We noted several instances in which the System's contractor oversight procedures did not detect or correct noncompliance.
The System did not use the method specified in the Group Insurance Benefits Act to compute the minimum required insurance fund reserve. Management indicates that the method used is consistent with the System's insurance reserve computations in prior biennia. However, this computation method resulted in the System requesting from the 75th Legislature approximately $30 million more in state funds than was necessary to achieve the statutory minimum reserve.
Better coordination with the Texas Department of Insurance could help the System obtain useful information about insurance complaints, HMOs' financial soundness and regulatory compliance, and insurance programs' actuarial soundness.
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