Pension system to benefit from makeover

OPM awards $290M contract to improve quality and timeliness of retirement services

A new pension administration system, which seeks to eliminate multiple interim annuity payments that many new retirees now receive, is designed to ensure that they get their first retirement annuity checks on the day they are due, according to Office of Personnel Management officials.

OPM announced May 3 that it had awarded a 10-year, $290 million contract to Hewitt Associates to create the pension system, a major component of a retirement systems modernization project that will affect 5 million participants. OPM plans to award separate contracts for converting its paper records and for business transformation services.

Hewitt Associates, which begins work June 1, will base the system on its own Total Benefits Administration software, which the global human resources company uses to manage pension administration for hundreds of companies.

When fully operational, retirement systems modernization and new defined benefits technology will improve the quality and timeliness of services that OPM and employing agencies can offer federal employees and retirees, said Linda Springer, OPM’s director.

“With the ability to get a complete online look at retirement-related data, employees and HR officials have the advantage of planning for various milestones in an employee’s career, including retirement,” she said.

Hewitt Associates’ Total Benefits Administration software handles retirement claims processing. It also provides electronic access to retirement-related records, employee benefits, and employment and salary histories. It includes tools to help employees predict future salary increases, manage their finances and plan for their retirement, OPM officials said.

Employees will have access to a Web site to calculate future salary increases and overall assets based on their General Schedule ranking. They will have interactive voice access to the system’s retirement benefits services.

The contract “is a step in the right direction to leverage more commercial technologies that already exist,” said David Powner, director of information technology management issues at the Government Accountability Office. In February 2004, Powner contributed to a GAO report on OPM’s efforts to modernize its retirement systems.

At that time, GAO reported that OPM’s retirement systems modernization project was at risk of falling behind schedule and exceeding its budget because the agency lacked the resources to develop and manage project requirements, manage risks and provide accurate spending data.

OPM has since solved some of those problems in-house and with contracts such as the one it awarded to Hewitt Associates, Powner said. He said senior executive oversight of the modernization project would be essential to its success. “We recommended executive-level oversight be very active, very engaged right out of the gate,” Powner said. “I think you’ve seen a lot from the director of OPM. She’s clearly engaged.”

OPM officials said their HR and IT employees will test the new pension administration system and closely monitor the work to ensure that costs are kept in check.

“Large projects like these are very risky,” said Lee Dettman, director of the retirement systems modernization project at OPM. “Maintaining the bounds of the schedule costs and scope is one of the big challenges.”

OPM’s earned value office, assisted by the consulting firm Booz Allen Hamilton, will monitor the project using earned value management to control the project’s schedule, scope and cost, Dettman said.

The current pension benefits administration system is mostly paper-based. “We currently have 144,000 file drawers full of papers,” said Robert Danbeck, OPM’s associate director of human resources products and services. Agency officials said they expect to issue a contract soon to have those records digitized.

OPM publishes modernization goals

In March, the Office of Personnel Management published milestones for improving career opportunities and benefits for the federal civilian workforce. Among the milestones are these 2006 deadlines for improving federal retirement benefits administration:

Goal: Award retirement systems modernization contracts and begin implementing a defined benefit technology solution by May 1. (Missed deadline.)

Goal: Begin implementing a business transformation and information technology service by June 1. (Future deadline.)

Goal: Answer 85 percent of general retirement benefits inquiries within 72 hours by Oct. 1. (Future deadline.)

Source: Office of Personnel Management

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