“The [State Retirement System’s] Senior Management team worried about the general morale in the office. Physical and budgetary constraints had forced an early decision not to increase staff for the project. The Executive Director feared he would not be able to keep up with daily operations, and a growing sense of frustration threatened the retention of capable staff members. The two programmers who had created SRS’ legacy system were only able to participate on a part-time basis. The project goal the SRS had worked so hard to achieve seemed at risk. It was clear something had to be done.” -Sagitec Case Study on Change Management in IT Projects

Over the last 25 years, the pendulum in the public pension industry has been swinging from Defined Benefit (DB) plans to Defined Contribution (DC) plans. Powerful advocates in the government and financial sectors have proclaimed that DC plans are the key to reforming a broken pension industry, regardless of the state of the economy. In a bear market, DB plans are unsustainable they say. They put state and local agencies on the path to inevitable failure. On the other hand, in a bull market, DC plans significantly outperform DB plans. Why wouldn’t a pension fund want to follow the DC model?

Performance bonds (e.g., surety bonds) have long been used by state and local government agencies to mitigate risk in major public sector IT projects.  A bond provides protection in case a software vendor doesn’t fulfill its contractual obligations. It also allows government agencies to demonstrate fiduciary responsibility with taxpayer funds.

Implementing a new pension administration system can be one of the most significant investments a retirement plan ever makes. Between consulting fees, software licensing, training, and support, there are a multitude of factors that will impact the price tag of a system replacement project. With retirement funds under increasing pressure to do more with less, it is absolutely essential that plan administrators make smart choices in IT investment. This means thoroughly understanding the goals of the project, communicating clearly the expectations of the new system, and being realistic about the constraints in your resources. For those considering IT modernization, take in mind that the following factors will impact the cost of your project. 

Today’s pace of technological advancement is fast. Scary fast. For the IT professional driving the technological equivalent of a Ford Pinto, every road is an entrance to the freeway and one look in the mirror is enough to send shivers down the spine. Obsolescence has a lead foot. It's got the pedal to the metal (so to speak) and it's bearing down on your legacy system like a Mack truck with the high beams on.

#1. A Massive Swell of Retirees will Stretch your Administrative Capabilities to the Limit