Public Pension Challenges: Public Pension Systems Can Benefit from Operations Modernization
The calendar turning from August to September signals the inevitable end of summer, and with it a return to a faster pace and renewed focus on work and new initiatives. Although this blog’s late-August publication date still qualifies it as a summer post, it nevertheless marks the start of our new three-part series on public pension systems and the challenges surrounding their administration and modernization.
According to the U.S. Census Bureau, there are over 5,000 public retirement systems in the U.S. today that administer defined benefit pension plans to state and local government employees.i The largest 75 systems account for more than 80% of all participants and assets.ii The largest public retirement system has assets of more than $350 billion, and more than one million active and retired members; the smallest systems have assets of less than $1 million.iii Despite their size, programming, and funding differences, many pension systems face the same challenges, in particular the technology challenges, that result in inefficient, manually dependent, and inflexible operations.
As a result, many of the public pension system RFPs that come across our desks cite the same solution needs: “improved business processes,” “automated manual and workaround tasks,” “enhanced stakeholder communication,” and so forth. The fact is that most of our public pension systems nationwide are dealing with legacy solutions that were state-of-the-art when first installed 20, 30, or 40 years ago. Therefore, most public pension systems are experiencing the niggling effects of old legacy systems and need a new public administration system (PAS) for efficient processing and streamlined operations. Below we list some of the more prevalent operational issues that result from this dated technology, and how individual features of a modern PAS can remedy those specific obstacles.
Results of – and Remedies to – Legacy Technology
Unavoidable manual processes. Since so many legacy systems are still in use across public pension systems nationwide, many have had to retain preexisting, manual internal processes and paper-dominated customer engagement methods that result in internal inefficiencies and poor customer experiences. Case in point: a recent client analysis noted that due to their system’s limitations, they are forced to maintain 46 different transaction types that require paper documents and wet signatures. This also necessitates close to 8,000 document scans per month, creating extra manual and time-consuming work for staff. This labor also takes staff away from more critical assignments, leaves room for human error, and often yields low morale. To eliminate these manual processes, public pension systems require a PAS with increased straight-through processing, as well as natural language processing, which will remove the need for repeated, manual data entry. For staff, this frees up time previously spent on mundane tasks, providing them with the time for higher-priority duties or professional development.
Nonexistent automation. Too little to nonexistent process automation is a significant problem for public pension systems who not only have to service current members, but also onboard the impending wave of baby-boomer retirees estimated to join over the next five to 10 years. With modern imaging and workflow technology, public pension systems can easily integrate and consolidate the multiple data streams necessary for onboarding and continuous record keeping, to avoid backlogs and reporting inaccuracies. Native and configurable workflow capabilities can also translate complex business processes into a series of repeatable and easily completed steps.
The digital self-service void. One of the greatest needs of most public pension systems today is more robust, digital self-service. Without modern, digital self-service, members are too dependent on system staff, plan administrators, and employers for assistance and customer support, which is often time-consuming and requires mailing and hand-delivering of important documents. With comprehensive digital self-service capabilities, pension systems can enable members to perform administrative activities across omni-channel devices 24/7, saving them and system staff inordinate amounts of time and effort. A client reported that after partnering with Vitech to implement a next-generation digital solution, the client greatly improved on basic account viewing on its website; experienced increased member service and engagement; and enhanced the security of member information by not relying on physical mail to send and receive sensitive information. The client also saved nearly $1 million per year in paper, printing, and mail charges, with almost two million documents now paperless. (When members activate member self-service, they default to paperless delivery of the relevant documents.) Finally, the client achieved significantly higher rates of straight-through processing, with 68,000 beneficiary nominations, 25,000 address changes, 32,000 income verifications, and 84,000 retirement benefit estimates online in the first year.
Plodding CRM and campaign management. Legacy systems are devoid of automated customer relationship management practices; as a result, system staff is responsible for the many tasks necessary for full-service member support. A modern platform can provide public pension systems with a complete, real-time service center and consolidate relevant customer data to one source of truth, enabling one-stop, efficient contact resolution. Targeted campaign management is also a benefit of an enhanced solution, with bi-directional, omni-channel communications that enable public pensions systems to create and deliver proactive, targeted communications to members and employers. To round out the CRM function, modern systems can often provide new members with a system onboarding curriculum to simplify enrollment, along with a configurable UI/UX for effortless external and internal platform use.
Weakened resiliency, security, and scalability. This important triumvirate of public pension system operations is more likely to be compromised in a legacy system. These are highly valued and indispensable capabilities of a public pension system, with malfunctions likely to result in vulnerable data and frequent system downtime. Modern systems can accommodate industry best practices, leverage emerging technology capabilities, and increased enrollment while incorporating new features and adhering to the regulations of industry governing bodies. The result is a secure and adaptable system that can absorb inevitable enrollment expansions when baby-boom generation members commence retirement.
Many public pension systems throughout the U.S. operate via archaic legacy systems that lack the modern technology for efficient, straight-through processing, an effortless customer experience, effective CRM and system security, resiliency, and scalability. These systems can benefit from a modern PAS with the attendant technologies such as native configurability, natural language processing with embedded ML/AI technology, robust APIs, and data pre-fill capabilities that are the hallmarks of an advanced platform. With comprehensive operations modernization, public pensions systems can provide superior service and ultimately meet the financial needs of its members, to ensure dignity and security in their retirement years.
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 National Association of State Retirement Administrators (NASRA.org) pg. 1