Fixing the retirement system

OPM in a race against time

Office of Personnel Management officials are trying to modernize the federal retirement system for more than 2 million workers. But it’s a major challenge that involves billions of dollars in retiree assets.

Plagued by problems ranging from inaccurate account totals to faulty monthly checks, OPM officials face growing pressure from lawmakers to complete the Retirement Systems Modernization program.

They have also been criticized for lacking sound management procedures for handling the program’s $50 billion in benefits.

“Billions of dollars of federal employee and annuitant retirement benefits are dependent on the accuracy and effectiveness of OPM’s retirement systems, but longstanding attempts to modernize these systems have not materialized,” Government Accountability Office auditors wrote in a report that criticized OPM.

GAO officials found that OPM has some plans on the drawing board, including effective strategies for completing the project. But more work is necessary to manage the modernization effort, especially security aspects, according to the report.

OPM’s modernization plan includes improving customer service and reducing calculation errors. The four major components of modernization are licensing technology to administer benefits, converting paper files to digital files, developing electronic processes to capture and store data, and determining coverage.

Fixing the system is challenging, however, because many retirement calculations are complex. OPM officials estimate that their benefit calculations produce an 11 percent error rate.

Kay Coles James, former OPM director, assured the GAO auditors before she left the agency that the modernization program would become more efficient.

“We are committed to the successful implementation of the Retirement Systems Modernization initiative,” James wrote in a letter to GAO officials.

Many obstacles block an efficient modernization program, even when using the newest technology, said Christian Weller, a senior economist at the Center for American Progress, a progressive think tank in Washington, D.C.

“The point is you want to make sure the accounts are credited and people know what’s in there,” he said. “What often happens with modernization is that pension plans get bells and whistles added on, such as 24-hour service. Do people really need a question answered at 3 a.m.?”

Modernization estimates approach $300 million

Office of Personnel Management officials have spent about $22 million on the agency’s Retirement Systems Modernization program and plan to spend an additional $272 million to complete the new system by 2008.

The following tasks must be completed:

  • Awarding a contract next year to license software for administering benefits.

  • Issuing a request for proposals and select a vendor by September to convert paper files into electronic data.

  • Deploying software for determining coverage.

  • Enhancing the hardware and network infrastructure.

    Source: Government Accountability Office

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