Florida Pension Does Not Have to Repay HHS

April 22, 2004 (PLANSPONSOR.com) - Federal auditors have concurred with the state of Florida - the state employee pension system does not owe the U.S. Department of Health and Human Services (HHS) a $267 million refund.

Following the latest audit, HHS officials havedropped their contention that the pension system, which serves employees of 800 state and local government agencies, violated federal rules because it maintains reserves to offset future investment losses.   Previously, HHS said the Sunshine State overcharged for pension payments that Washington contributes on behalf of state employees who work in programs funded by the federal government, such as Medicaid (See Uncle Sam: Florida Pension Fund Owes $267M ), according to a St. Petersburg Times report.

Florida officials argued that the state’s contribution rates were the result of a great deal of research and actuarial analysis and are designed to help keep the state’s $93-billion public pension fund humming along financially.   Thus, the state remained steadfast that it did not owe a refund to HHS.

The controversy picked up wide coverage 18 months ago over allegations that federal officials agreed to delay the initial audit of the state’s pension fund during Florida Governor Jeb Bush’s re-election efforts. The federal audit was originally scheduled to begin in April 2002, but Janet Rehnquist, daughter of U.S. Supreme Court Justice William Rehnquist and then HHS Inspector General postponed the audit until July 2002 after receiving a call from Kathleen Shanahan, Bush’s chief of staff.  Shanahan and Bush said the delay was requested because both Florida agencies that would be involved, the state’s investment staff and its retirement division, were in the midst of leadership changes.

But Democrats, noting the delay insured the audit would not be finished until after November’s election, contend Bush’s office sought the delay to avoid negative publicity about the pension fund.  “It is very possible that this was a deliberate action on the part of the state to make our budget look better than it really was,” said Senate Minority Leader Ron Klein, a South Florida Democrat.

Rehnquist resigned in June 2003, saying she wanted to spend more time with her family and pursue other opportunities. Her decision to delay the audit was among a number of controversial actions that led to an investigation of her management by Congress and a committee of fellow inspectors general (See  Janet Rehnquist Ends Controversial Tenure with Resignation ).