DRS: Benchmarking shows stable administrative fee; IT project drives short‑term cost bump

Marcus Erlander, director of budget and performance management at the Department of Retirement Systems, briefed the Select Committee on Pension Policy on the CEM benchmarking survey for fiscal year 2024.

"So we'd like to thank you for the opportunity to talk, with you today to walk you through the results of the CEM benchmarking survey for fiscal year 24," Erlander said, opening the presentation. He and Seth Miller, DRS director of member experience, described the CEM process, which this round included 78 participating pension systems and a peer group of larger U.S. administrators that includes systems such as CalPERS and Texas TRS.

The agency emphasized that the benchmarking focuses on administrative costs—the money DRS spends to deliver benefits, not the total cost of the benefits themselves. Erlander showed a long‑term trend of DRS's administrative fee dating back to 1977 and said DRS has been "fairly stable over time" but that large, one‑time projects affect the short‑term level of the fee.

Seth Miller said a clear finding was that project spending—primarily major information‑technology work—makes up a significant portion of DRS’s reported administrative cost in FY2024. "One thing that's interesting when you look at this chart is the ratio between the base spending and the project spending," Miller said. He described the agency’s core project to replace its pension administration system as the principal example of a major project that increases costs during the implementation window.

Miller also described a dip in service performance during the COVID period driven largely by hiring pauses and onboarding new retirement specialists. "The primary driver in where we dropped off and where we've improved over the last few years is our phone responsiveness," he said, noting the agency expects service scores to continue improving as new staff are trained and the agency completes backlog work.

Director Leathers, a member of DRS leadership, told the committee the core pension administration (PAM) project is scheduled to complete roughly in September 2027, explaining the timetable for the project‑related costs committee members had seen on the charts.

DRS’s charts presented both combined administrative and project spending and a separate view that excludes projects; the agency said that when major projects are removed from the comparison DRS is more cost‑competitive with its peer median. The presenters emphasized the benchmarking’s value in breaking out costs by service area—front office FTEs, third‑party costs, and other administrative areas—so DRS and the committee can review where savings or higher spend occur.

The presentation concluded with committee acknowledgment of the briefing and an invitation for questions and follow‑up; DRS staff said they will provide updated benchmarking data once the next CEM report is completed.