Tacoma Employees Retirement System LRWL Inc. Presentation March 12, 2015
Introductions LRWL Chris Fikes Project Director Ben Lott, CPA, PMP Vice President 2
Agenda Topics LRWL Experience LRWL Project Deliverables for TERS Recap of Deliverable 3 Recap of Deliverable 4 Recap of Deliverable 5 Strategic Roadmap 3 Options Option 1 New Pension Administration System Option 2 Major SAP Initiatives and Supporting Projects Option 3 Status Quo Next Steps / Path-Forward Questions and Answers LRWL Recommended Alternative 3
LRWL Experience - Background Our Corporate Mission To assist public retirement systems in exceeding the expectations of their customers. We do this by providing the most experienced and professional staff in the industry. Founded 1981 - Technology and management consulting firm Since 1994 - focused exclusively on supporting the public pension industry Retirement Benefits administration 4
LRWL Experience - Background LRWL Corporate Experience : 70+ clients LRWL Staff Individual Experience prior to joining LRWL: 60+ clients LRWL is among the largest firms of its type that specializes in Technology and Management consulting for the public pension industry (we don t do any implementations or programming or coding avoid conflict of interest) 20 highly qualified, highly experienced professionals on staff 5
LRWL Experience All Clients 6
LRWL Experience TERS Specific At one extreme, we are proud to point out that of the 20 largest public pension systems in the US, more than half have utilized LRWL s services in major projects related to meeting their strategic goals CalSTRS, NYSLRS, NJDPB, NCRSD, etc. But perhaps more important, at the other end of the spectrum is the list of LRWL s 20 similar sized clients that are more comparable and closer peers to TERS Our experience has shown that pension systems with fewer than 20,000 participants tend to have many similarities; we use that criteria for comparisons 7
LRWL Experience: Similar Sized Clients Portfolio Value ($Billion) Total Plan Parti-cipants (000 s) Number of Agency Employees A-Bus Analysis / BPR Retirement System San Bernardino County ERA 5.0 29.9 30 Milwaukee ERS 4.0 26.8 40 Los Angeles Fire and Police PS 15.7 25.8 125 District of Columbia RB 4.2 24.9 48 Colorado FPPA 3.4 23.7 25 Fairfax County ERS 2.5 22.4 32 San Diego City ERS 3.8 20.2 60 Alameda County ERA 5.2 20.1 82 Denver ERP 1.7 19.3 25 Contra Costa County ERA 5.0 18.6 37 Virgin Islands GERS 1.3 18.2 89 Baltimore ERS 2.1 19.2 24 Kern County ERA 2.3 15.9 20 Austin ERS 1.7 11.5 14 City of San Jose DRS 4.6 11.2 34 San Mateo County ERA 2.7 10.5 20 Fort Worth ERF 2.0 10.3 19 Tulare County ERA 0.9 8.2 9 Sonoma County ERA 1.3 8.1 15 City of Springfield CRS 0.3 7.7 4 City of Fresno RS 2.1 5.8 14 Tacoma CERS 1.4 5.6 7 El Paso Firemen & Policemen s PF 0.9 3.3 5 Charlotte Firefighters RS 0.3 1.5 3 B-Evaluating Existing PAS C-RFP Creation for Custom D-RFP for PAS Solution E-Data Conversion F-IRS and 415 Experience H-Vendor Evaluation I-COTS Knowledge J-Integration of Document Mgmt 8
LRWL Experience Core Project Activities and Tasks Current business and systems assessments Strategic technology planning Business case development, needs / feasibility analysis Best practices identification and implementation assistance Business process reengineering Organizational change management including planning, participating, and facilitating RFP development Procurement assistance Contract negotiations QA - Quality Assurance PM Project Management OPM Oversight Project Management IV&V Independent Verification and Validation Testing planning and assistance Data cleansing analysis Imaging and workflow support Employer reporting change support Staff augmentation 9
LRWL Project Deliverables for TERS Deliverable 1: Project Workplan Deliverable 2: Project Status Reports Deliverable 3: Current Technology Assessment Deliverable 4: Business Processes and Best Practices Deliverable 5: Strategic Roadmap Deliverable 6: Summary Report / Board Presentation Note that Deliverables 3, 4 and 5 are included as supporting material to this Summary Report / Board Presentation. 10
Recap of Deliverable 3 Current Technology Assessment Overview of TERS Organization Identify Existing TERS IT Projects Trends Public Retirement System Trends Private Sector Financial Services Industry Trends Technology Trends Current Technical Environment LRWL Analysis and Recommendations Five (5) Short-Term Improvements Two (2) Mid-Term Improvements Six (6) Long-Term Improvements 11
Recap of Deliverable 4 Business Processes and Best Practices TERS Business Processes and Best Practices Evaluation of twenty (20) TERS business processes resulting in individual high-level summaries, as-is process flow diagrams and LRWL provided process-specific best practice recommendations Level of Automation and Transaction Volume Assessment of the level of automation that exists today at TERS and the transaction volume for those identified processes. LRWL Global Best Practice Principles A listing and overview of seventeen (17) best practice principles seen in the Retirement System industry. 12
Recap of Deliverable 5 Strategic Roadmap LRWL has been working with TERS to understand their existing business, their existing technology and solutions, and more importantly their vision for the future of their organization Staff indicted and expressed their concern that often their work requires additional manual and/or spreadsheet verification in order to ensure accuracy and completeness A Visioning Session with TERS staff and LRWL resulted as to what the future may look like for TERS The Strategic Roadmap resulted in three (3) primary initiatives / options regarding TERS information processing environment: Option 1 New Pension Administration System Option 2 Major SAP Initiatives and Supporting Projects Option 3 Status Quo. 13
Recap of Deliverable 5 Strategic Roadmap Each alternative was described along with the expected benefits, envisioned challenges, projected timeframe, and projected costs Overall intent was to provide information and alternatives for consideration; so that a decision or formal direction could be made by the TERS Board of Administration. 14
Strategic Roadmap Option 1 New Pension Administration System Description A new pension administration system (PAS) would enable TERS staff to: Perform all of their duties associated with their business operations in a single commercial off-the-self (COTS) solution With full retirement-industry capabilities Including peripheral features such as imaging, workflow, case management and correspondence generation. These solutions exist in the marketplace and are all browser-based thus allowing for participant (i.e., members, annuitants, etc.) to perform their own self-service capabilities This alternative includes the following steps: Develop a comprehensive Request for Proposals (RFP) Conduct a formal procurement Implement a stable, state-of-the-industry, fully integrated solution capable of supporting TERS mission well into the future. There are probably 4 to 6 vendors who would be interested in the TERS project. 15
Strategic Roadmap Option 1 New Pension Administration System Expected Benefits Improved service levels to members Improved management of member, retiree and employer information Improved accuracy of all information collected, maintained, and provided by the retirement system Improved timeliness and accuracy of responses to members' inquiries Improved system audit and control capabilities Improved management reporting features Increased and improved Web-based, self-service functions to members, retirees, and employers 16
Strategic Roadmap Option 1 New Pension Administration System Expected Benefits (continued) A secure environment for the receipt and transmittal of information (data) related to members, retirees, and employers Continuous upgrade, new versions and releases provided by vendor Seamless integration of pension administration, imaging, workflow, CRM, ad-hoc reporting, and other peripheral components Incorporated into a peer, user-group community of other system users (i.e., clients) of the same solution allowing for participation and involvement in future product features, enhancements and vendor annual conferences Positioned for the next evolution of technology where the vendors are already enabling their solution for access and processing via mobile devices. 17
Strategic Roadmap Option 1 New Pension Administration System Challenges The cost is more expensive than other options It requires more staff time to work with the solution provider over the course of the project Learning curve involved for staff to understand new solution, new technology, new capabilities, etc. Limited marketplace and solution offerings available Potential for obsolescence of vendor over time. 18
Strategic Roadmap Option 1 New Pension Administration System Proposed Timeline Project Activity Tentative Start Date Tentative End Date Projected Duration RFP Development 4/1/2015 8/31/2015 5-months Procurement Process / Contract 9/1/2015 2/28/2016 6-months Negotiation Pension Administration Project 3/1/2016 8/31/2018 30-months 3 rd Party Project Management / OPM / QA 3/1/2016 8/31/2018 30-months Post-Implementation Support 9/1/2018 Ongoing Ongoing City of Tacoma IT Yearly Assessment 1/1/2016 Ongoing Ongoing Additional IT and/or TERS Staff 1/1/2016 Ongoing Ongoing 19
Strategic Roadmap Option 1 New Pension Administration System Projected Costs Project Activity Projected Cost (Low) Projected Cost (High) Projected Cost (Average) One-Time Costs: RFP Development $100,000 $150,000 $125,000 Procurement Process / Contract Negotiation $30,000 $50,000 $40,000 Pension Administration Project $3,000,000 $7,000,000 $5,000,000 3 rd Party Project Management / OPM / QA $500,000 $1,000,000 $750,000 TOTAL One-Time Costs $3,630,000 $8,200,000 $5,915,000 Annual Recurring Costs: Post-Implementation Support $200,000 $600,000 $400,000 City of Tacoma IT Yearly Assessment $30,000 $100,000 $65,000 Additional IT and/or TERS Staff $125,000 $175,000 $150,000 20
Strategic Roadmap Option 1 New Pension Administration System Projected Costs Comparable Systems SYSTEM 1 (2014) SYSTEM 2 (2013) SYSTEM 3 (2012) SYSTEM 4 (2011) SYSTEM 5 (2009) Number of Agency Employees 14 21 35 11 10 Number of Employers 1 3 1 1 3 Number of Active Members 8,387 5,100 5,900 3,669 5,000 Number of Retirees 4,831 4,300 4,900 2,267 2,000 Non-Recurring Project Costs Hardware Hosted $231,119 Hosted Hosted $65,063 Commodity Software $46,929 $580,379 Hosted Hosted $78,266 Implementation Services $3,486,577 $6,411,977 $5,921,884 $2,052,650 $2,456,005 Software License n/a $975,000 n/a $242,800 $260,000 Total: Non-Recurring Project Costs $3,533,506 $8,198,475 $5,921,884 $2,295,450 $2,859,334 21
Strategic Roadmap Option 2 Major SAP Initiatives and Supporting Projects Description A series of SAP initiatives and other supporting projects which, when bundled together, could be accomplished by TERS, the City of Tacoma IT, and other 3 rd party vendors / consultants These initiatives would require dedicated staffing and project funding in order to complete them in a reasonable timeframe The initiatives would build-upon and enhance the current offerings of the SAP solution The supporting projects would provide peripheral benefits to the TERS business operations The benefit would be to leverage what exists today (i.e., SAP) and build upon it as needed With the understanding that it would not be a full Pension Administration System (PAS). 22
Strategic Roadmap Option 2 Major SAP Initiatives and Supporting Projects Expected Benefits Staff has an existing familiarity with SAP TERS has a good working relationship with City of Tacoma IT Implementation of ECMS / Imaging can be conducted as a standalone project with a defined scope. Solution will provide online access for TERS staff to participants documents; as well as provide TERS with an overall document retention and backup solution of critical information Increased and improved Web-based, self-service functions to members, retirees, and employers Project(s) may be completed in less time than a new pension administration system as the scope is less Project should be less expensive than a new pension administration system. 23
Strategic Roadmap Option 2 Major SAP Initiatives and Supporting Projects Challenges TERS is still reliant on SAP which is not a full-functioning Pension Administration System There may continue to be conflicting priorities between / among the various city departments so TERS may not have a fully dedicated team on their project(s) Staff will not get all the functionality and features envisioned as they expressed during the Visioning Sessions (i.e., automation, future product enhancement, seamless solution integration, etc.) The projected timeframes and projected costs contained within this alternative are less certain due to limited data-points for comparison purposes If the project experiences any problems and/or delays there are limited alternatives available to TERS to leverage completion. 24
Strategic Roadmap Option 2 Major SAP Initiatives and Supporting Projects Proposed Timeline Project Activity Tentative Start Date Tentative End Date Projected Duration Electronic Content Management System 4/1/2015 12/31/2015 9-months (ECMS) Member Self-Service 4/1/2015 12/31/2015 9-months Workflow Management System (WMS) 4/1/2015 12/31/2015 9-months Workflow Management System (WMS) Leverage General Government & TPU Effort (2017/2018 Biennial Budget) 1/1/2017 9/30/2017 9-months In-House, Online Pension Calculator 4/1/2015 12/31/2015 9-months Centralize Numbering System in SAP 4/1/2015 7/31/2015 4-months Employer Self-Service 4/1/2015 5/31/2015 2-months City of Tacoma IT Yearly Assessment 1/1/2016 Ongoing Ongoing 3 rd Party Project Management / OPM / QA 4/1/2015 3/31/2016 12-months 25
Strategic Roadmap Option 2 Major SAP Initiatives and Supporting Projects Projected Costs Project Activity One-Time Costs: Projected Cost (Low) Projected Cost (High) Projected Cost (Average) Electronic Content Management System $75,000 $125,000 $100,000 (ECMS) Member Self-Service $100,000 $200,000 $150,000 Workflow Management System (WMS) $75,000 $125,000 $100,000 In-House, Online Pension Calculator $100,000 $300,000 $200,000 Centralize Numbering System in SAP $50,000 $150,000 $100,000 Employer Self-Service $10,000 $40,000 $25,000 3 rd Party Project Management / OPM / QA $200,000 $300,000 $250,000 Total One-Time Costs: $610,000 $1,240,000 $925,000 Annual Recurring Costs: City of Tacoma IT Yearly Assessment $30,000 $100,000 $65,000 26
Strategic Roadmap Option 3 Status Quo Description This alternative would be for TERS to keep doing what they do today (i.e., status quo) TERS would continue to work with the City of Tacoma IT to prioritize projects and complete them Historically under this approach a few projects are completed periodically pending the needs of TERS and the City of Tacoma s IT availability As projects get completed; new projects are added and it is a continuous process of reviewing and re-prioritizing the projects. 27
Strategic Roadmap Option 3 Status Quo Expected Benefits The expected benefit of this alternative is that all parties are familiar with the process, the people and the reduced scope of complexity TERS is able to request projects and then pending their review and prioritization; the City of Tacoma IT works on those projects and completes them accordingly This approach uses very little resources (i.e., 1 or 2 people from the City of Tacoma IT) This approach has minimal specific project cost other than the yearly IT assessment charges. 28
Strategic Roadmap Option 3 Status Quo Challenges TERS is still reliant on SAP which is not a full-functioning Pension Administration System There may continue to be conflicting priorities between / among the various city departments Staff will not get all the functionality and features envisioned as they expressed during the Visioning Sessions (i.e., automation, future product enhancement, seamless solution integration, etc.) The projected timeframes and projected costs are less certain due to limited data-points for comparison purposes; however most items are essentially at a $0 cost as they are worked on as time permits 29
Strategic Roadmap Option 3 Status Quo Challenges (continued) There will always be new initiatives / competing priorities and thus certain items on the list will remain on the list indefinitely without any certainty for completion TERS staff frustration not only with the existing system but also with the uncertainty for when help will be on the way due to the continuous re-prioritization of outstanding items. 30
Strategic Roadmap Option 3 Status Quo Proposed Timeline Project Activity Tentative Start Date Tentative End Date Projected Duration City of Tacoma Employee Self Service 2/1/2015 10/31/2015 9-months (ESS) Membership Eligibility Table 2/1/2015 4/30/2015 3-months Notification Mechanism 2/1/2015 10/31/2015 9-months Reporting Tool 2/1/2015 1/31/2016 12-months Letter Generation 2/1/2015 1/31/2016 12-months Health Department Data Maintenance & 2/1/2015 3/31/2015 2-months Record Keeping Electronic Content Management System TBD TBD TBD (ECMS) Member Self-Service TBD TBD TBD Workflow Management System (WMS) TBD TBD TBD In-House, Online Pension Calculator TBD TBD TBD Centralize Numbering System in SAP TBD TBD TBD Employer Self-Service TBD TBD TBD City of Tacoma IT Yearly Assessment 1/1/2016 Ongoing Ongoing 31
Strategic Roadmap Option 3 Status Quo Projected Costs Project Activity Projected Cost (Low) Projected Cost (High) Projected Cost (Average) One-Time Costs: City of Tacoma Employee Self Service (ESS) $0 $0 $0 Membership Eligibility Table $0 $0 $0 Notification Mechanism $0 $0 $0 Reporting Tool $0 $0 $0 Letter Generation $0 $0 $0 Health Department Data Maintenance & Record $0 $0 $0 Keeping Electronic Content Management System (ECMS) $75,000 $125,000 $100,000 Member Self-Service $0 $0 $0 Workflow Management System (WMS) $0 $0 $0 In-House, Online Pension Calculator $100,000 $300,000 $200,000 Centralize Numbering System in SAP $50,000 $150,000 $100,000 Employer Self-Service $0 $0 $0 Total One-Time Costs: $225,000 $575,000 $400,000 Annual Recurring Costs: City of Tacoma IT Yearly Assessment $30,000 $100,000 $65,000 32
Next Steps / Path-Forward Discuss any concerns or questions regarding each of the Options Make a decision or provide formal direction on which Option to pursue Further refine the exact scope of the selected Option Build a workplan Execute against the workplan Report against the workplan. 33
Questions???? 34
LRWL Recommended Option LRWL recommends Option 1 New Pension Administration System based upon: The Industry Trends in the Marketplace The Limitations of the Current Technical Environment The Industry Best Practices and Guiding Principles The Limited Levels of Automation and Reliance on Manual / Spreadsheet Processing that Exists Today This Approach having a Defined Path with Reliable Activities based upon Comparable Timeframes and Costs Overall Concern that if this option is not chosen by TERS today it still may be chosen a few years down the road so why wait Our Understanding of the TERS Organization and Business Processes 35
LRWL Recommended Option LRWL recommends Option 1 New Pension Administration System based upon (continued): Our Understanding of the Existing TERS IT Projects Our Corporate Experience and Expertise Our Work with Other Retirement Systems The Value of TERS being part of a User-Group with their Peers that use the same Pension Administration System Continuous Upgrades and New Releases Assurances and Protection should the City of Tacoma every moveaway from the use of SAP Built-in Best Practices, Process Automation and Seamless Integration. 36