New York City Retirement Systems Administrative Review Report for Office of the Comptroller

Executive Summary

This report summarizes the administrative review performed by Milliman of the five New York City Retirement Systems (“NYCRS”):

• New York City Employees’ Retirement System (NYCERS)
• Teachers’ Retirement System of the City of New York (TRS)
• Board of Education Retirement System of the City of New York (BERS)
• New York City Police Pension Fund (POLICE)
• New York City Fire Pension Fund (FIRE)

The primary purposes of the administrative review are to:

• Conduct a high-level review of existing administrative controls.
• Review the member services and experiences.
• Test the validity of the data provided to the Office of the Actuary (OA).

In systems as large and complex as those in NYCRS, there are many aspects to the administration process.  The reader should recognize that many of the issues that we reviewed and which we will discuss in this report are subject to opinion and professional preference.  By its nature, a review of another professional’s work product will tend to focus on those aspects where the reviewer believes some modification in current procedures would be desirable.  Hence, a report such as this will devote the majority of the presentation to commentary that, even though intended to be constructive, may give the reader the impression that only issues exist. Therefore, we would like to state clearly up front, that overall, we found the administrative procedures and processes in place meet or exceed Milliman expectations for each of the systems.  While we will discuss areas where we believe some modifications in administrative procedures or processes would be beneficial, that discussion should be considered within the context of an overall favorable review of the systems.

To conduct the review, Milliman provided each of the systems with an administrative request covering the following categories:

• Administration Procedures
• Audit Control Methods
• Performance
• System Capabilities
• Other Processes

Each system was asked to provide responses to a series of twenty-eight requests pertaining to the administrative practice utilized within those categories.  After reviewing the materials provided, responses to follow-up requests, and discussions with Milliman, we provided each system a copy of the preliminary draft of this report, along with the opportunity to review the report, ask questions, and provide additional information to us.  All systems provided feedback along with updated information and materials that were relevant but not previously provided.  This report contains our amended commentary, as appropriate, reflecting any additional information provided, and conversations had with the systems.

Based on the response provided by the system, each of the twenty-eight requests were scored with Needs Improvement (□) or Satisfactory (◆).  The report that follows provides the score and detailed commentary for all requests within each category.  This summary grid provides an overall review using the following metrics:

• ◆ indicates that the System scored satisfactory in all segments within that category.
• □ indicates that the System scored Satisfactory in most segments within that category, but there was at least one segment that scored Needs Improvement within that category.
• □ indicates that the System scored as many or more Needs Improvement as Satisfactory in the segments within that category.

Based on these scores, we have concluded that overall, each system is being administered in an appropriate and expected manner in comparison to Milliman’s best practices, industry standards and industry trends.  Each system has been proactive with procedural improvements and enhancing system functionality and have various enhancements currently under consideration.  We encourage them to continue looking forward and pursuing these enhancements.

The systems maintain large and complex plans and generally have the proper procedures in place to handle the volume and complex work involved.  This report provides additional details and specifics about each system, but the following items contain our overarching comments and suggestions for improvements within each category.

Administrative Procedures

Most of the systems provided robust documentation of their administrative procedures and we have rated each system for each item as satisfactory.  We do note that the level of information provided for NYCERS, TRS and BERS was much more detailed than the level of information provided for POLICE and FIRE.  NYCERS, TRS and BERS have systematic processes in place to generate the annual valuation files to the OA.  However, only NYCERS and TRS documented a thorough review and reasonability checks prior to sending the data to the OA.  We encourage the other systems to put similar processes in place to better ensure the quality of the data provided to the OA.

Audit Control Methods

Each of the systems indicated their procedures for maintaining audit controls and we have rated each system for nearly every item as satisfactory.  There were a few items where we believe additional controls should be implemented.  We suggest the systems continue to evaluate their processes and find opportunities for automation of the calculator.  The complexity of the plans can make a more automated calculator difficult but also important.  Efficiencies for staff and mitigation of risk are created through automation by reducing human error.

Performance

Meeting member expectations and timing needs when providing services is an important part of plan administration.  Milliman has evaluated each system’s ability to perform tasks in a timely manner and were assessed in comparison to the different systems and to industry standards.  In total, we found each system is able to assist members through the process in a reasonable amount of time and set expectations for next steps. However, each system tracks varying levels of performance measurements.  While it can be difficult to measure these types of analytics, they can help identify areas in need of improvement.  TRS and NYCERS identified the need to improve the wait time members were facing and both increased the number of staff by 33% and nearly 50%, respectively. BERS utilized overtime and increased staff to reduce backlogs and improve response times to its members.

System Capabilities

Overall, every system has had a focus on improving their system capabilities for several years.  NYCERS, TRS and BERS currently set the standard for the online participant experience where members can initiate the retirement process, upload documents, perform what-if-calculations, and make retiree changes.  Although the other systems contain some, but not all of this functionality, each is actively working towards an improved online presence.  BERS recently appointed a Chief Information Security Officer to implement robust fraud prevention activities to safeguard member’s data while providing members with an online retirement tool.  We encourage the systems to continue developing and pursuing the plans they have in place, including the most up-to-date security measures such as multi-factor authentication.

Other Processes

In this section, we reviewed the procedures in place to handle situations that are more non-standard in practice such as Domestic Relations Orders (DRO), methods for commencing benefits for former employees at their first commencement date, and the ongoing procedures ensure that deaths are identified and appropriately handled for both retirees and beneficiaries.  There are varying levels of effort made towards early identification of deaths through third party searches by the systems.  NYCERS and TRS have robust procedures in place including the use of several vendors to ensure a wide breadth of possible results.  BERS recently implemented a search with results anticipated by the end of 2023.  The frequency at which the member population is identified, and the results returned reduces the number of overpayments made to deceased retirees.  We recommend all other systems look at these procedures if implementation plans are not in place already.

Future Reviews

The scope of this administrative review focused on process and procedure based on responses provided by each of the systems throughout the duration of this project.  Part II of our administrative review will include a review of the benefit calculations, including the consistency of the data used in these calculations with the data supplied to OA for valuation purposes.

However, the scope of these reviews will not encompass a review of the participant experience nor the underlying data.  In future administrative reviews, it may be beneficial to provide access to the online calculation system for reviewers to understand how participants access information and perform what-if calculations to gauge the accuracy of such calculations.  Additionally, a participant survey may be of assistance in future reviews to more accurately reflect participant satisfaction with performance and member support.

Finally, we recommend a review of the data provided by employers to each of the systems to review the methodology and accuracy of the information supplied and maintained by the systems.