You Say You Want a Revolution

As an entire generation of baby boomers enters their golden years, it's a time of technological upheaval for public retirement systems.

by / September 2, 2004
Had he been an average American worker instead of a pop-singing, iconoclastic voice of his generation, Paul McCartney would today be almost ready to journey into the halcyon days of retirement.

Born in 1942, McCartney sits on the introductory fringe of legions of baby boomers ready to launch an incursion into the resources of this country's public retirement systems.

The 1960s-era teenyboppers who once donned their best duds and horn-rimmed glasses to scream and faint at the sight of the Fab Four are now entering their Eleanor Rigby years as part of the healthiest generation ever to exist.

Americans are living longer, and that's good news -- but good news that comes with complications.

Currently there are nearly 36 million Americans age 65 or older. In 10 years, that number will increase to more than 40 million, and by 2030, retirement age Americans will surpass 70 million -- nearly 20 percent of the U.S. population.

Bill Ruh, CTO of Software AG, a company helping to automate annual retirement statements at the massive California Public Employees Retirement System (CalPERS), calls the current convergence of conditions a "perfect storm."

"There are shrinking state budgets coupled with recent poor performance of retirement system investments, meaning funds are not available to hire additional call-center staff to answer questions on the phone," he said. "Baby boomers who will soon retire in large numbers look to the Web to get information -- a recent survey showed that the fastest-growing segment of Internet users is senior adults -- and services."

You Tell Me It's the Institution
It's no wonder public retirement systems -- traditionally notorious for being buried in paperwork -- increasingly look to technology to relieve overburdened workers and better serve constituents.

And it's about time.

Big business spent the past decade automating processes and eliminating paper wherever possible. State and local governments jumped on the e-bandwagon several years ago -- though many are just now getting to where they technologically would like -- but public retirement systems have lagged.

Low turnover, which would be considered a plus in other circumstances, is one reason public retirement systems are behind the times, said Lynn Cummings, business technology strategies coordinator for the New York State Teachers' Retirement System (NYSTRS).

"A lot of people, like myself, have been working here a long time -- 20 or 30 years. We have less than 3 percent turnover a year," she said. "Our people were used to doing things the way they'd always been done. There's been a lot of resistance to change."

Tim Garza, chief of the Business Solutions Office at CalPERS, the largest public retirement system in the country, cites a slightly different reason for the slow build toward automation.

"CalPERS is a government entity," he said. "Like all government agencies, we are very conscious of the obligation we have to those we serve. Traditionally government technology upgrades lag behind the private sector, but that's because we have to be certain we are serving the public the best way we can and are using their dollars wisely."

Along with trepidation at changing longstanding practices and responsibility to honor public trust, the sheer volume of the paper process --applications and beneficiary forms, and changes in status, claims and individual benefit statements -- as well as a glut of historical paper documents make massive automation intimidating.

But radical change is taking place.

"Our research of a sample of public retirement agencies shows that about one-third have already put into place one or more of what we call the 'top-five practices,'" said Ruh. "Those practices include electronic form submission, online member self-service, real-time access to account information, automated ad hoc report creations and distribution, and electronic enrollment of new members."

Considering the 2,500-plus public retirement systems in the United States, one-third represents a substantial number of agencies. However, it means two-thirds, or nearly 1,700, still have much work to do.

You Say You Got a Real Solution
Steps being taken to improve the many systems are varied, but the general consensus among those who have been there is that well thought out deployments are, in the end, worth the cost and effort.

After all, with shrinking budgets and demand for increased services, automation is becoming necessary.

About five years ago, CalPERS officials began a major effort to improve business processes. The organization provides retirement and health benefits to more than 1.4 million customers, processes more than 62 million documents each year and works with 2,500 employers.

"We knew we were going to soon be facing new demands from a new generation of customers," said Garza. "But we needed to meet those needs in a cost-effective manner. We needed to provide a return on our investment."

For the Business Solutions Office at CalPERS, proving ROI has been the least of its worries, Garza explained. It's not tough to prove even an investment of tens of millions of dollars is worth it, he said, when automation has made operations 80 percent more efficient overall, with specific productivity increases ranging from 30 percent to 120 percent.

Those figures evolved from a three-year plan that began by looking at how business processes were designed.

"Our claim-based processes were driven by documentation and forms, so we looked at ways to automate that," Garza said. "We looked not only at self-serve mechanisms for the customer, but also at re-engineering our back office to eliminate handling paper where we could."

As part of that effort, CalPERS imaged more than 1 million paper files. The agency also automated its communications exchange system, allowing employers to submit contributions online, among other things.

In addition, CalPERS improved its internal workflow process by tying various internal systems together and building a corporate database.

In terms of customer service, CalPERS developed a customer relations environment that tracks incoming calls, and after customers enter their Social Security number, all caller account information is displayed for call center staff.

Furthermore, some of the organization's most labor-intensive processes now are available to customers in self-service format online.

If the changes have been drastic from a technological standpoint, they've been nothing short of revolutionary for customers.

"Retirement income estimates used to take workers 30 to 40 days to complete," said Garza. "Those can now be done instantly online. Retirement applications used to take 120 to 160 days to complete, and that process now takes about 30 days. Those kinds of changes not only add value for the customer, but also reduce costs."

We All Want to Change the World
Technological improvements similar to those instituted at CalPERS are paying off for retirement systems and their customers across the United States.

Officials at the Nebraska Public Employees Retirement System implemented their Pension Information of Nebraska for Efficient and Effective Retirement (PIONEER) system, which will improve records management and reporting capabilities, enhance customer service functions, improve data quality, reduce processing times for requested services, and improve work tracking and process management.

At both NYSTRS and the California State Teachers' Retirement System (CalSTRS), automation efforts are similarly moving ahead.

"There are at least 20 initiatives under way," said Bill Hobbs, recently retired deputy chief executive officer for CalSTRS, which spends at least $20 million per year on improvement projects. "A good part of those are Web-based initiatives, but there are also real fundamental initiatives that are changing processes and assuring the quality of information."

NYSTRS also committed to process-improvement projects. The organization implemented an imaging/workflow system six years ago and has added efficiencies since then. The group continues to make improvements and is working to offer more Web services.

Meanwhile, the North Carolina Department of State Treasurer awarded BearingPoint Inc. a $19 million contract to deploy a new Web-based Integrated Retirement System Project (IRSP). The project -- costing $28 million over the course of 11 years -- will integrate six legacy mainframe systems into a single IT platform that should increase efficiencies, lower operating costs and dramatically improve customer service.

In Arizona, the state's retirement system took on something of a new persona altogether.

"Over the last 10 years, we've gone from being kind of a small mom-and-pop operation to where we're essentially a major financial services provider," said Anthony Guarino, chief operations officer for the Arizona State Retirement System (ASRS).

With more than 400,000 members and growing, Guarino said the organization was forced to develop a strategic plan outlining the ASRS' business goals and objectives. Part of that plan included figuring how best to use technology.

"We knew we wanted members to have easy access to expert counseling, education services, retirement planning tools; fast turnaround time on service requests; and to receive calculations, payments and disbursements on a timely, consistent and accurate basis," Guarino explained. "We wanted whatever we needed in available technology to meet those goals."

The ASRS is imaging hundreds of thousands of old microfilm files to allow workers to emerge from dark and dank data mines while pushing forward the ASRS' other goals, such as automating workflow, providing online services to members and creating a relational database that can feed other systems and provide instant access to account data, among other things.

You Ask Me for a Contribution
With so much technology being deployed, one might suspect public retirement systems were as lush with funds as say, a well invested, aging rock superstar. But officials across the country say that's not exactly true.

Existing in a netherworld as part of government, though not quite part of government, public retirement systems are governed by complex rules and regulations meant to ensure their financial solvency. Such safeguards may help guarantee cash in the cookie jar, but that doesn't mean securing technology funding is easy.

"There is some available money to do these things," said NYSTRS' Cummings. "But it's there for a purpose: to keep administration costs low, because money has to be there for pension benefits."

Garza agrees.

"We're really just trying to get the biggest bang for our buck in providing better benefits and services," he said. "We're very conscious of our productivity-to-cost ratio. We evaluate from an ROI perspective and always want to see a value back from the things we do."

The process of securing technology-upgrade funding can be arduous. Before approaching their board and the state Legislature for funds, the group at the ASRS developed detailed goals and a plan.

"We had to develop goals to get a budget," Guarino said. "Nobody was going to give us a $40 million blank check."

Securing technology funding was a challenge, said Guarino. "Our board and Legislature made us demonstrate we knew what we were doing," he said. "It wasn't just a 15-minute oral presentation. We had to have plans, estimates and projections, clear expectations. It took us a couple months in the summer of 2000 to get funding through our board."

Officials also had to promise the state that by 2007, system members would have simpler and faster access to all expert counseling, education services, fast turnaround and much more -- and that the access would be easy to demonstrate.

In truth, retirement systems are subject to the same types of budget constraints as state and local governments. The idea that money is their business may foster the embarras de richesses illusion, but it's pragmatic parsimony that keeps retirement systems moving toward their technological goals.

"We often find an unanticipated cost savings or avoidance comes with improved customer service," explained Hobbs. "For example, when we make information available on the Web, we find we save money on postage and labor, and reduce the load on our phone center."

In fact, IT officials at nearly every public retirement system in the nation will tell you saving money is a mere byproduct of their increased customer service goals.

"Six years ago we didn't even have a call center," said Guarino. "This year we'll take some 225,000 member calls. We're experiencing tremendous growth, and with the coming of the baby boomers, it's expected to increase even more. Our technology continues to develop out of a need to serve our members."

Don't You Know It's Gonna Be All Right
Public retirement system technology continues to grow.

"Two and a half years ago, CalSTRS had seven or eight people dedicated to driving technological change," said Hobbs. "Today there are at least 120 full-time staff in that role on a wide variety of projects, plus a major commitment on the part of the executive management to supporting those efforts."

Executive management support seems to be common to major automation efforts. IT officials say technology improvement projects must emanate from the top down to be successful.

"Our CEO is very supportive," said CalPERS' Garza. "Efforts like this -- continuous improvement efforts -- have to be driven from the top. Our executive staff is the driving force in all our work."

Anyone who's ever been involved in a major automation reinvention effort can attest to the burnout that is common when undertaking such long and often painful endeavors.

"Any implementation is difficult to an extent," said NYSTRS' Cummings. "There are a lot of things you don't know going in. You find out as you go along. We started with pie-in-the-sky ideas, but reality sets in and you back off a little."

The story in Arizona is the same, but Guarino offers hope to agencies just beginning to automate processes.

"In any major project, you go through experiences that are different at different times," he said. "Sometimes you're very excited. Sometimes fatigue sets in. But you become better at doing these things. Our last project was better than the project before that. That's how it goes."

And it is going.

The ASRS, CalPERS, CalSTRS, NYSTRS and hundreds of other public retirement systems continue to automate workflow procedures, build self-service portals, take on huge imaging projects and generally step into the world of 21st century technology.

The change is major. The initial cost outlay sometimes is intimidating, and the process sometimes uncomfortable. But in the end, both customers and officials agree -- it's worth it. Whether large automation projects will indeed help make everything all right is, according to Guarino, a question of simply knowing what you want and taking that first step.

"There has to be a vision. 'If you don't know where you're going, any road will take you there,'" he said, adding, "By the way, those aren't my words, that's George Harrison."

The revolution has begun.
Kris Middaugh Staff Writer