Public Pension Challenges: Pension Systems and Enhanced Member Self-Service
I’m confident that most Americans don’t spend that much time thinking about U.S. public pension systems, even though at some point most will either help fund or rely on one for financial security when they retire. According to the U.S. Census Bureau, roughly 5,000 public sector retirement systems exist in the U.S. today.i These state- and locally-administered plans collectively have 14.7 million active (working) members and 11.2 million retirees, with $323 billion in annual benefit distributions.ii Those already-significant figures will balloon with the coming wave of retiring baby boomers, and should increase further with so many boomers choosing to retire due to the pandemic, as well as those that lost their jobs as a result of the subsequent recession.iii
This additional capacity doesn’t bode well for most U.S. public pension systems, who are already faced with inefficient, manually-dependent, and inflexible operations due to obsolete legacy technologies. These mainframe platforms were simply not designed to handle the transaction volume and complexity of today’s public pension systems, much less an effortless member experience. Of the many modern features that these systems require, perhaps the most urgent is enhanced member service, via digital self-service that puts administrative capability into the hands of pension members and other constituents, for 24/7 omni-channel servicing.
The Enhanced Member Self-Service Imperative
Without public pension system member self-service, members are overly dependent on system staff, plan administrators, and employers for customer support, which is often time-consuming and requiring mailing and hand-delivering of important documents. This manual labor also takes staff away from more critical assignments, leaves room for human error, and often yields low morale. With comprehensive self-service, members can perform administrative activities across multiple channels at their convenience, saving them and system staff inordinate amounts of time and effort. One such example involves a recent public pension client partnering with Vitech to implement a next-generation digital solution for enhanced member self-service. The client’s objectives included: 1) Improving on basic account viewing on its website; 2) Increasing member service and engagement; and 3) Enhancing the security of member information by not relying on physical mail to send and receive sensitive information.
After the client’s 500,000 active members were transitioned to the new member self-service application three months after a soft rollout to 50,000 tech-savvy users of the previous self-service application, the client experienced 38% adoption by active members and 23% adoption by retired members in the first year. The client subsequently realized a reduction of $800,000 per year in paper, printing, and mail charges, with 1.9 million documents now paperless. (When members activate member self-service, they default to paperless delivery of the relevant documents.) Through the enhanced member self-service, the client recognized 68,000 beneficiary nominations, 25,000 address changes, 32,000 income verifications, and 84,000 retirement benefit estimates online in the first year of the new application. Future self-service capabilities will include more complex transaction types within the member self-service offering. Members will also be able to track the status of financial transactions within member self-service by having questions addressed such as “When will I receive my benefits?” and “Did you receive my direct deposit payment?” to generate a status of the transaction and prevent a significant volume of calls to the call center for added member convenience and operational efficiency for the plan administrators.
As public pension systems expand with the growing wave of retiring baby boomers, systems need to upgrade their member self-service capabilities to empower members to take charge of their own account administration. Members’ self-service capability will not only make them more proactive about their own retirement planning, but also free system staff to attend to more important tasks and greater vocational development. Public pensions with next-generation self-service will realize immediate results from transformation efforts and can create a foundation for system success, in addition to members’ long-term retirement security.
To see how V3locity can streamline your public pension administration, secure your data, and revolutionize your system’s technology in one integrated solution, click here.
i States Info, https://www.nasra.org/states
ii Public Plans Data, National Data: https://publicplansdata.org/quick-facts/national/
iii “The Pace of Boomer Retirements Has Accelerated in the Past Year,” Nov. 9, 2020, Pew Research Center.