Streamline management operations to help pinch pennies
Pension plan management is one of the most important jobs in local government. Trillions of dollars in assets are held in trust for more than 20 million working and retired government officials, who represent almost 90 percent of all public employees. Public pension plan managers and finance officers distribute an average annual pension amount of roughly $20,400 per retiree to nearly 7 million retirees, beneficiaries and other recipients, which adds up to more than $140 billion in benefits annually (an amount greater than the total economic output of 22 states).
Many of those plans are held in local systems that cover the employees of a single municipality or their police officers and firefighters. They are managed by professionals who report to boards composed of local government officers and, often, representatives of local employee unions.
Especially during difficult economic times, plan participants, as well as taxpayers and elected officials, want to know whether their funds are properly invested and whether the assets are in jeopardy. The best way to maintain confidence is through quality reporting.
The following are a few high standards that boards should require from their system's reporting.
Customized reporting. With good data control comes flexibility and reliability in producing essential reports.
Efficient data quality control. Entry errors are frequent, even considering handling the extreme volumes of data in pension plans. Because one employee can be covered under a number of different plans, the recordkeeping system should be able to correct the data on a single employee with one entry, not through multiple entries.
Easy benefit estimates. A system should be able to calculate benefits for an employee group through a single batch run, rather than employee-by-employee.
Preliminary payroll runs. Payrolls that take up valuable time can shut down operations for more than a day, and errors can force multiple runs. Top-notch systems' preliminary runs can make corrections with quicker final payroll outputs.
Online data entry. Easy data entry and immediate validation that helps to eliminate errors are the hallmarks of a state-of-the-art employer reporting portal.
Because the cost of a full system may be difficult for a local plan, administrators may be able to negotiate a lease option that improves their operation while keeping the cost within their budget. Another alternative is to join a multi-employer plan that uses a state-of the-art system. Some local plans have found that they can operate more efficiently by taking advantage of a statewide retirement system with good quality controls.
Public pension plans are an essential part of the financial operations of local governments. In a time of financial constraint, efficient management of the plan's operations is as important as the investment returns on the assets.
Stephen Garrow is chief executive officer of New York-based Tegrit Financial Group.