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PUBLIC PENSION ADMINISTRATION
BENCHMARKING ANALYSIS
SUMMARY OF FISCAL YEAR 2014
LEOFF PLAN 2 RETIREMENT BOARD - JULY 22, 2015
Jan Hartford, Principal, CEM Benchmarking
Mark Feldhausen, Budget and Performance Mgmt Director, DRS
INTRODUCTION
CEM Benchmarking
Founded in 1991 in Toronto, Ontario
Started with investment management in Canada and US
Currently serve over 350 blue chip corporate and government
clients worldwide
Comprehensive pension administration benchmarking is
one component of the service
PARTICIPANTS
74 pension systems participated in FY 14
33 from the United States
14 from Canada
7 from the Netherlands
1 from Denmark
1 from the United Arab Emirates
10 from Australia*
8 from the United Kingdom*
*Systems from Australia and the UK complete a separate benchmarking survey so they are
not reflected in the report but they are accessible via the peer network and in best practice
analyses
DRS’ PEER GROUP
DRS’ peers are the larger US systems
A few larger US systems don’t participate
DRS is the median in size
Washington DRS
Oregon PERS
Wisconsin DETF
Iowa PERS
Cal STRS
Cal PERS
Colorado PERA
Arizona SRS
TRS of Texas
Florida RS
Michigan ORS
NYSLRS
Pennsylvania PSERS
STRS Ohio
Ohio PERS
Virginia RS
Indiana PRS
North Carolina RS
South Carolina RS
Illinois MRF
TRS IllinoisPeer/participant from state
Smaller participant from state
No participant from state
(includes Alaska and Hawaii)
TOTAL COST
DRS = $59, Peer Median = $77, Peer Average = $85
DRS has consistently
been lower cost
$84.70
$58.88
$0.11 $0.83 $8.50
$8.85
$0.33 $7.20
$40
$50
$60
$70
$80
$90
Pee
r A
vera
ge C
ost
Eco
no
mie
s o
f Sca
le A
dva
nta
ge
Few
er
Tra
nsa
ctio
ns
pe
r M
emb
er ("
Wo
rklo
ad
")
Mo
re T
ran
sact
ion
s p
er F
TE (
"P
rod
uct
ivit
y")
Low
er
Co
sts
per
FTE
Low
er
Oth
er F
ron
t-O
ffic
e C
ost
s
Low
er
Ma
jor
Pro
ject
Co
sts
(etc
*)
DR
S'
Co
st
EXPLAINING DRS’ LOW COST
CEM analyzes six
reasons for the
differences in total
cost. The top 3 for
DRS were:
Low Costs per FTE
was the largest
High Productivity
was second
Low Major Project
Costs* was third
*This category includes slightly higher costs for Legal and
Actuarial services
DRS’ total service score is higher than the peer median
DRS scores at or above the Peer Median in 11 of the 14 activity level measures
Many of these include direct member transactions (aka, “responsiveness”)
The others include high touch, high cost elements (e.g., field counseling, comprehensive statements)
DRS=80
Peer Med=74
SERVICE
There isn’t a linear
relationship between
Service and Cost
However, DRS is in the
desirable quadrant of
High Service and Low
Cost
SERVICE AND COST
We continue to administer one of the more complex systems
(although others are gaining ground as they implement plan changes)
We’re higher than the Peer Average in 13 of 15 causes. In the other 2, some:
Allow employers to change the benefit structure
Publish materials in multiple languages
DRS = 88
Peer Avg = 67
COMPLEXITY
We spend 21% less
on IT than the peer
median
Consider where we’re
at in the IT investment
cycle
It’s more expensive to
develop and maintain
IT systems for plans
with complex rule sets
Yet our systems
score as more
“capable” than the
peer average
DRS=$18.68
Peer Med=$23.50
DRS=84
Peer Avg=75
INFORMATION TECHNOLOGY
PREDICTED COST
DRS Actual = $59, Predicted = $84
Equation factors in: economies of scale, transaction volumes, complexity and cost environment.
WHY DRS PARTICIPATES
Why?
Comprehensive/independent analysis
Data-driven comparisons to our peers
Low cost, high service, high complexity and capable IT
An operational network of peers
Ideas for continuous improvement
Any questions?