In­side the bat­tle to stop Phoenix from in­fect­ing trou­bled PS pen­sions

‘Con­tam­i­nated’ pay data spells new trou­ble for re­tirees, ben­e­fi­cia­ries

Ottawa Citizen - - FRONT PAGE - JAMES BAGNALL

No one thought it would come to this.

Mi­ramichi and She­diac should have been work­ing in tan­dem. In­stead, two years af­ter the launch of the un­for­tu­nate Phoenix pay sys­tem, these New Brunswick towns find them­selves in an awk­ward em­brace of tech­nol­ogy and man­age­ment gone wrong.

Mi­ramichi of course is the epi­cen­tre of the gov­ern­ment’s fran­tic ef­fort to fix Phoenix — the deeply flawed decade-long project to mod­ern­ize and con­sol­i­date a pay sys­tem that af­fects 300,000 gov­ern­ment em­ploy­ees, about two-thirds of whom have their pay pro­cessed through the Mi­ramichi of­fice.

Nearly 700 pay ad­min­is­tra­tion work­ers there are strug­gling to whit­tle down a back­log of some 600,000 pay queries and trans­ac­tions, most deal­ing with in­cor­rect amounts on em­ploy­ees’ pay stubs.

Now these er­rors are threat­en­ing the gov­ern­ment em­ploy­ees’ pen­sion plan, run by a staff of 730 plus in nearby She­diac.

The She­diac em­ploy­ees are well placed to watch the drama un­fold. They op­er­ate a call cen­tre and han­dle the in­tri­cate de­tails of a sys­tem that in­cludes more than 850,000 gov­ern­ment em­ploy­ees, pen­sion­ers and ben­e­fi­cia­ries.

The cen­tre’s ba­sic mis­sion is to cal­cu­late re­tirees’ pen­sions us­ing mul­ti­ple pieces of soft­ware in­clud­ing a cal­cu­la­tion en­gine known as Pen­fax. Be­fore Phoenix launched on Feb. 24, 2016, the job was rel­a­tively straight­for­ward.

Pen­sion ad­min­is­tra­tors col­lected pay data from hu­man re­sources col­leagues through­out gov­ern­ment, and com­bined it with in­for­ma­tion about em­ploy­ees’ pen­sion­able ser­vice. Then they ap­plied a for­mula to de­ter­mine the pen­sion to be paid out.

But for the past two years, pen­sion ad­min­is­tra­tors have watched with mount­ing con­cern as pay er­rors piled up in Mi­ramichi and be­gan in­fect­ing the pen­sion sys­tem as well.

“This would be our worst night­mare,” says the ad­min­is­tra­tor of a pen­sion sys­tem for pro­vin­cial gov­ern­ment em­ploy­ees, “to be im­port­ing pol­luted salary data into our sys­tem.”

The ex­tent of the pol­lu­tion is un­clear. But the re­sources de­voted to clean­ing it up are both sig­nif­i­cant and grow­ing. Prior to Fe­bru­ary’s fed­eral bud­get the gov­ern­ment had hired nearly 400 ex­tra staff to deal with pub­lic ser­vants’ salary er­rors. About 100 pay spe­cial­ists were hired at Mi­ramichi, the rest at tem­po­rary satel­lite of­fices in Ot­tawa and else­where. The gov­ern­ment this year is adding an­other 500 pay em­ploy­ees, which would bring the to­tal to 1,500 com­pared to the orig­i­nally tar­geted 550.

The goal is to fix salary er­rors be­fore they are for­warded to She­diac. How­ever, pen­sion ad­min­is­tra­tors there can’t yet count on a clean stream of salary data — not when pay ad­min­is­tra­tors have yet to make an ap­pre­cia­ble dent in the back­log at Mi­ramichi.

In re­sponse She­diac has added staff as well. Two months be­fore Phoenix went live, the pen­sion cen­tre em­ployed 650. It has since added 85 peo­ple. Sig­nif­i­cantly, 55 of the new hires have been as­signed the job of “val­i­dat­ing data re­ceived from Phoenix.”

This is in­ten­sive work. The LinkedIn job de­scrip­tion of one She­diac em­ployee notes he has been tasked to “re­view and cor­rect all in­con­gru­en­cies in Pen­fax gen­er­ated by Phoenix pay sys­tem.” This ex­er­cise in­volves record­ing all pen­sion ac­count ac­tiv­ity “for fu­ture ref­er­ence and to keep track of er­rors and pat­terns caus­ing the in­con­sis­ten­cies.”

Cor­rect­ing mis­takes is labour in­ten­sive. To ver­ify a pen­sion, ad­min­is­tra­tors of­ten must track a ca­reer through mul­ti­ple fed­eral de­part­ments and col­lect pay and pen­sion doc­u­ments go­ing back more than 30 years. The pen­sion cal­cu­la­tions must take ac­count of ca­reer in­ter­rup­tions trig­gered by train­ing cour­ses or ma­ter­nity leave.

The good news, if it can be called that, is that the num­ber of gov­ern­ment work­ers po­ten­tially af­fected so far seems man­age­able.

While a ma­jor­ity of the 300,000 fed­eral gov­ern­ment em­ploy­ees who rely on Phoenix have re­ceived in­cor­rect salaries since 2016, fewer than 30,000 have so far en­tered the pen­sion sys­tem. This in­cludes 20,800 pub­lic ser­vice em­ploy­ees, 1,650 RCMP mem­bers and 5,460 mem­bers of the Cana­dian Armed Forces.

Equally for­tu­nate, mil­i­tary and non-civil­ian RCMP per­son­nel had not yet switched their pay sys­tems to Phoenix when prob­lems with the lat­ter be­came ap­par­ent. The re­sult: Their salary data is not plagued with the same kinds of er­rors as that of other fed­eral gov­ern­ment em­ploy­ers.

Pub­lic Ser­vices and Pro­cure­ment Canada, the fed­eral de­part­ment re­spon­si­ble for both the pay and pen­sion cen­tres, said a re­cent au­dit of pen­sion pay­ments re­vealed an er­ror rate of just two per cent — about the same as dur­ing the two years prior to Phoenix’s launch.

How­ever, this statis­tic doesn’t tell us much about the ex­tra ef­fort now be­ing ex­pended — such as as­sign­ing ex­tra staff to dou­ble-check Phoenix data — be­fore send­ing out pen­sion cheques to new re­tirees.

Through spokesman Pierre-Alain Bu­jold, Pub­lic Ser­vices con­firmed that in the case of work­ers em­ployed by the fed­eral gov­ern­ment be­fore Phoenix went live, the num­ber of records re­quir­ing a pay cor­rec­tion has in­creased 25 per cent. (For gov­ern­ment work­ers hired in the past two years, there’s been a 60-per­cent jump in the amount of ef­fort re­quired to cor­rect pay records but since these em­ploy­ees won’t be re­tir­ing any­time soon, their ex­pe­ri­ence has lit­tle bear­ing on the pen­sion sys­tem.)

“The sit­u­a­tion was fine un­til Phoenix came along,” said an in­dus­try of­fi­cial fa­mil­iar with the in­ner work­ings of the new pen­sion sys­tem.

There is also a side is­sue whose im­por­tance will only be­come clear in the months ahead. It con­cerns the qual­ity of some of the salary and em­ployee ser­vice data en­tered into Pen­fax af­ter the 2003 launch of the project to mod­ern­ize the pen­sion sys­tem — data that is sud­denly rel­e­vant for peo­ple re­tir­ing now.

Pen­fax, which was de­signed by James Evans and As­so­ciates of Vic­to­ria and is em­ployed by other large pen­sion plans across the coun­try, does not ap­pear to be the is­sue. Sev­eral pen­sion ex­perts we con­sulted say they have man­u­ally dou­ble-checked pen­sion and other cal­cu­la­tions pro­duced by Pen­fax.

“I’ve never had a prob­lem with it,” said an ac­tu­ary based in the Ot­tawa area.

Rather, the dif­fi­culty ap­pears to lie with process er­rors such as in­putting data us­ing in­cor­rect soft­ware codes. This ap­pears to crop up dur­ing cal­cu­la­tions that in­volve anom­alies from full-time, reg­u­lar ser­vice — leaves with­out pay, part­time ser­vice and ma­ter­nity leave, for ex­am­ple.

If this seems an echo of the Phoenix project, it’s not sur­pris­ing. The gov­ern­ment’s pen­sion-sys­tem up­grade, like that of the pay sys­tem, did not ini­tially in­clude soft­ware patches to in­clude all the vari­ables in­volved in an em­ployee’s ca­reer, which forced pen­sion and pay work­ers to do man­ual work­arounds. The projects were also driven by the same two themes.

In both cases, Pub­lic Ser­vices and Pro­cure­ment Canada in­vested in ef­fi­cient new soft­ware sys­tems, then cen­tral­ized ad­min­is­tra­tion in New Brunswick. The think­ing was that pre­dicted ef­fi­cien­cies would al­low the gov­ern­ment to run its pay and pen­sion sys­tems with sub­stan­tially fewer em­ploy­ees. As we know, the two sys­tems played out very dif­fer­ently.

In the pen­sion project, the gov­ern­ment hired Hewlett Packard En­ter­prises (now DXC) and James Evans and As­so­ciates (among other tech firms) to im­ple­ment Pen­fax and re­lated tech­nolo­gies.

“It was a huge ef­fort to clean up the data,” said a pri­vate sec­tor en­gi­neer in­volved with the project in its early days. “We were deal­ing with a 35-year-old pen­sion sys­tem.” Nev­er­the­less, the en­gi­neer in­sisted the data “was for the most part fixed dur­ing con­ver­sion to the new pen­sion sys­tem.” The ma­jor is­sue to­day, he added, is the pay data be­ing im­ported from Phoenix.

It may be more com­pli­cated than that. Con­sider the case of Laura Prevost, a for­mer Canada Rev­enue Agency em­ployee who re­tired in 2014 and, as she did so, ar­ranged to buy roughly 18 months’ worth of ex­tra pen­sion cred­its (as she was en­ti­tled to do). Her ini­tial pen­sion did not in­clude the im­pact of the ex­tra cred­its, known as a buy­back.

Prevost an­tic­i­pated that her pen­sion pay­ments would in­crease once the pa­per­work in­volv­ing the buy­back went through. In­stead, in 2016, she was shocked to dis­cover her pen­sion de­posit ac­tu­ally dropped by roughly $100 per month.

This was the start of a two-year odyssey ded­i­cated to un­cov­er­ing the source of mul­ti­ple er­rors in her pen­sion ac­count. Along the way she has spent thou­sands of dol­lars on le­gal and ac­tu­ar­ial fees. Prevost’s quest has been all the more painful be­cause 2016 was also the year af­ter she sep­a­rated from her hus­band.

Prevost and her lawyer Eric Letts learned that, dur­ing her first cou­ple of years of re­tire­ment, she had been re­ceiv­ing too much pen­sion be­cause the sys­tem had over-es­ti­mated the num­ber of years dur­ing which she con­trib­uted to­ward her pen­sion.

The de­tails are com­pli­cated, in­volv­ing stretches of ma­ter­nity and other types of leave. In some cases Prevost opted to con­tinue con­tribut­ing to­wards her pen­sions, in other cases, not, as the rules per­mit­ted. Emails ob­tained through ac­cess to in­for­ma­tion of­fer a re­veal­ing glimpse into how pen­sion ad­min­is­tra­tors cope with the pen­sion sys­tem’s var­i­ous quirks.

For in­stance, a note from Lisa Hébert, a Pub­lic Ser­vices of­fi­cial, in­formed Prevost her ser­vice credit (num­ber of years worked) had been over­stated by more than a year be­cause some stretches of her leave-with­out-pay had not been “coded cor­rectly in the sys­tem.”

More re­veal­ing is a note penned in 2016 by Jean-Philippe St- Onge, an­other pen­sion of­fi­cial, who ex­plained why Prevost had re­ceived an in­cor­rect es­ti­mate for the cost of buy­ing ad­di­tional pen­sion cred­its. “The in­for­ma­tion in the sys­tem was er­ro­neous, which led to er­ro­neous coun­selling,” St-Onge wrote. “This of­ten hap­pens with old ser­vice (records) from Canada Rev­enue Agency as the in­for­ma­tion recorded in the sys­tem back

then (pre-Pen­fax) was of­ten er­ro­neous.” He added this was why it was so im­por­tant to ver­ify salary and ser­vice data be­fore is­su­ing pen­sions.

This email sur­prised Prevost. “My legacy data and CRA records were cor­rect,” she said. “What I don’t know is how the data that wound up in Pen­fax be­came in­cor­rect.”

Er­rors do hap­pen in pen­sion sys­tems, es­pe­cially one as large as the one run by the fed­eral gov­ern­ment. The key is how ad­min­is­tra­tors deal with them. Part of the rea­son the pen­sion sys­tem run by She­diac didn’t col­lapse into Phoenix-like cri­sis is that ad­min­is­tra­tors were given suf­fi­cient time to sort out most of the is­sues — the sys­tem wasn’t rushed into ser­vice.

The pen­sion sys­tem’s call- cen­tre tech­nol­ogy and soft­ware pro­grams were de­vel­oped from 2005 to 2013 — roughly dou­ble the length of time gov­ern­ment project man­agers spent craft­ing the Phoenix pay sys­tem.

Not only that, the pub­lic ser­vice, RCMP and mil­i­tary were added to the new pen­sion sys­tem in stages from 2013 to 2017, giv­ing ad­min­is­tra­tors plenty of time to learn the quirks of Pen­fax, Siebel and Or­a­cle soft­ware and to de­velop work­arounds where nec­es­sary. In con­trast, Phoenix was launched in two phases early in 2016, sep­a­rated by mere weeks.

Nev­er­the­less, while this helps to ex­plain why the project to mod­ern­ize pen­sions worked when im­ple­ment­ing Phoenix did not, Prevost’s sit­u­a­tion also points to some se­ri­ous po­ten­tial prob­lems as pen­sion ad­min­is­tra­tors try to cope with the rush of Phoenix er­rors. Phoenix is nowhere near be­ing re­paired and the flow of re­tirees is both sig­nif­i­cant and un­re­lent­ing.

Not only that, deal­ing with pen­sion quirks is ex­tremely labour in­ten­sive — no fewer than six pen­sion ad­min­is­tra­tors were in­volved in coun­selling Prevost about her ser­vice buy­back op­tions, for in­stance. Nor is her law­suit against the gov­ern­ment re­solved. While pen­sion of­fi­cials, ac­cord­ing to email cor­re­spon­dence, have ac­knowl­edged er­rors in pro­cess­ing her ac­count, there is still a dis­pute about the tim­ing of her pen­sion ser­vice buy­back — a mat­ter Prevost es­ti­mates in­volves some $40,000 worth of pen­sion as­sets.

While cases such as Prevost’s could be un­usual, they do il­lus­trate the vul­ner­a­bil­i­ties in the pen­sion sys­tem.

The ad­min­is­tra­tors in Dieppe have enough on their hands with­out hav­ing to worry about the ex­tra com­pli­ca­tions of Phoenix pay er­rors. Un­for­tu­nately, this is where they are — play­ing pre­ven­tive de­fence in a game that may have years to play out.

This would be our worst night­mare, to be im­port­ing pol­luted salary data into our sys­tem.

WAYNE CUD­DING­TON

Laura Prevost, who re­tired in 2014 from the Canada Rev­enue Agency, has spent the past two years and thou­sands of dol­lars in le­gal and ac­tu­ar­ial fees to un­cover the source of mul­ti­ple er­rors in her pen­sion ac­count.

WAYNE CUD­DING­TON

Laura Prevost with her lawyer, Eric Letts. Upon her re­tire­ment from the fed­eral gov­ern­ment, Prevost dis­cov­ered a ma­jor flaw in the pen­sion sys­tem, which since the 1990s has been over­es­ti­mat­ing what re­tirees are en­ti­tled to. Now the sys­tem is claw­ing back money from re­tirees’ in­comes.

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