LIRR President's Testimony - U.S. Railroad Disability System

Joint Public Hearing: Office of the New York State Attorney General and Members of Congress 10/27/2008

Good morning Attorney General Cuomo and members of Congress. My name is Helena Williams, and since June 2007, I have been the President of the Long Island Rail Road. I am proud to lead this fine organization and its 6,800 outstanding employees, who work literally day and night and consistently provide exceptional, reliable service. The LIRR has produced record ontime performance in recent months due to their extraordinary efforts. Our employees should not be tarred with the brush of disability benefit abuse. That is simply unfair.

I appreciate the opportunity to talk with you today about occupational disability annuities granted by the federal Railroad Retirement Board, or RRB, an independent federal agency based in Chicago.

One point I would like to make absolutely clear from the outset - I am not in any way attempting to jeopardize the right of railroad workers to seek occupational disability benefits. This is an important protection for workers who are employed in our industry.
That being said, reform is clearly needed. The RRB approves nearly 98 percent of all occupational disability annuity applications nationwide. LIRR employees' applications are approved at this same high rate. However, LIRR employees have applied for these benefits at a disproportionately high rate in recent years, even though the LIRR's workplace safety record has shown dramatic improvement, with steadily dropping accident and injury rates.

Some advocates use these facts to suggest that this is merely an LIRR issue. But clearly it is not. As previously noted, this is a system that nationwide has granted disability pensions at a rate of 98 percent. On its face, a 98 percent approval rating indicates that the current nationwide system is broken. That is why I have been advocating reform of the entire system. There needs to be one, fair standard for all railroad workers who seek a disability pension, not one standard for LIRR retirees and another standard for all other employees around the country. All applicants should be willing to undergo a fair but thorough medical examination, including one from an independent, outside medical expert. The Railroad Board's own Inspector General, the Board's Management Member and the Association of American Railroads, which represents freight railroads, made a similar recommendation recently - and not just for the LIRR.

As background, the Railroad Retirement Act - or "the Act" - was enacted in 1937 to establish a benefits system for railroad employees, separate from - and instead of - the system established by the Social Security Act in 1935. In addition to retirement annuities, the Act also provides for the provision of disability annuities to railroad employees or retirees who are either unable to perform their regular railroad occupation or who are unable to engage in any regular employment. The RRB is comprised of three members a labor member, a management member and a chairman.

The RRB is charged by statute with administering the Act, including making determinations on applications for disability annuities. Railroad employers like the LIRR have no authority to make any decisions with respect to whether an applicant is awarded a disability annuity under the Act.

Indeed, applications for occupational disability benefits are granted by the RRB without any significant participation or opportunity for meaningful input from the railroads, including LIRR.

The Act's regular retirement annuities and disability benefits are funded primarily through contributions made by railroad employers and employees. The LIRR and its employees contributed a combined $143 million in 2007. The riders and taxpayers subsidize the LIRR, with taxpayers providing more than 50 percent of our operating funds.

As the steward of these funds, it is my responsibility to safeguard the taxpayers' investment in the LIRR. To that end, I have sought the assistance of our Congressional delegation in enacting much needed reforms to the RRB's disability review process and standards.

In July 2008, I contacted the RRB seeking information with respect to its occupational disability program after I received a number of inquiries from The New York Times about the issue. What I learned disturbed me. The great majority of LIRR disability annuities were related to just two of nearly 50 categories of impairments listed by the RRB, which generally covered arthritis and "other diseases of the musculoskeletal system". After reviewing all the information available at the time, in August I referred this entire matter to the Inspectors General of the MTA and the RRB.

It is clear that the disability annuity review process by the RRB needs reform. There have been ongoing, chronic problems with the RRB's occupational disability review process. In 1998, the RRB adopted hundreds of pages of regulations that set forth the process and standards by which the RRB would make disability annuity determinations. The purpose of those regulations was to safeguard against awarding occupational disability annuities to people who should not receive them. We know now, of course, that this purpose was not fulfilled.

An audit in 2000 was critical of the RRB's occupational disability review process. For example, the report pointed out the need for an independent medical review of occupational disability claims. In 2008, a second audit reviewed the recommendations of the 2000 report. The 2008 audit report found that there continued to be significant problems in the way the RRB was making determinations for occupational disability annuities.

In short , 10 years after adopting regulations that were supposed to ensure that only the truly occupationally disabled received these annuities, the process still is not working. This opinion is shared by the Management Member of the RRB, the President and CEO of the Association of American Railroads, and the RRB's own Inspector General. For example, earlier this month, on October 10, the RRB's Inspector General observed that "in most instances, the RRB . . . relies solely on medical information submitted by the doctors selected by the applicant," which, according to the IG, raised concerns of "collusion between the applicant and the doctor."

Although I welcomed the announcement last week that the RRB had adopted certain new measures, I am concerned that these steps are confined to just the LIRR. This is not simply an LIRR problem. The statistics bear this out: 98% of occupational disability claims nationwide are approved by the RRB. Of the 84,000 individuals who were receiving disability annuities from the RRB in 2007, 64,000 are receiving occupational disability annuities.

There need to be uniform standards - nationwide - governing how the RRB awards occupational disability annuities. The new rules that two of the three RRB members voted to adopt last week are an improvement but they must be extended to all applicants, not just to retirees from the LIRR. Our employees should not be singled out or held to a higher bar than other railway industry employees. A railroad employee who is truly occupationally disabled - whether employed by the LIRR, a freight operator, or any other railroad company - should not fear having to meet a thorough but fair medical examination in order to qualify for an occupational disability annuity.

Last Friday, I sent two letters to the RRB seeking additional information about their new reforms. I have copies of these letters for your review.

In addition to my correspondence with the RRB, on October 7th I turned over to the Attorney General evidence that suggested that certain of our retirees who had purchased shortterm disability policies while employed at the LIRR may be attempting to use their RRB occupational disability findings to collect on such policies. We similarly indicated the possibility for abuse with respect to disability policies offered through the credit union.

Finally, as Governor Paterson has made clear, the LIRR also needs to get its own house in order so that we can make certain we are doing everything we can to safeguard taxpayer funds. To that end, I recently announced the following reform measures:
First, we are now requiring that all LIRR employees take ethics training. Training sessions start tomorrow.

Second, we established a new compliance unit. As a result of an investigation that this unit undertook, evidence has been discovered that has led me today to suspend a LIRR employee pending completion of our own investigation. As part of our cooperation with the Attorney General's Office and the MTA Inspector General, we turned over this evidence to them for their use in their investigations.

In addition, I am announcing today the reorganization of the LIRR Pension Office. It will now report directly to the VP of Finance, with much closer supervision on all benefit functions. In addition, we are retraining all Pension Office employees and reminding employees and customers to be alert to possible waste, fraud and abuse and to report such concerns to the MTA Inspector General using the IG's toll free number.

Once again, I want to assure you that the LIRR is taking every possible step to safeguard public funds.

In closing, even as we push for reform, we hope that the public and our regular commuters recognize that the men and women who keep the LIRR running often do so under challenging conditions. Each day and night, in all kinds of weather, they climb up and down engines, operate, maintain and repair train equipment, install, inspect and maintain 700 miles of track, and put in shifts on their feet for hours on end. My goal is to ensure that the occupational disability annuity for rail workers nationwide remains available. But the RRB process must be reformed so that disability annuities are reserved for those who truly deserve them.

I will be happy to answer any questions you may have. Thank you.