CEM Benchmarking says system offers lower cost, better service than others
By Michael Pramik, Ohio Public Employees Retirement System
Dec. 7, 2023 – The Ohio Public Employees Retirement System provides a higher level of service at a lower cost than its peers, says an independent industry consultant,.
CEM Benchmarking annually conducts a study to see how global pension systems rate compared with each other in various cost, service and investment metrics. CEM Benchmarking Director Christopher Doll said that OPERS is a low- to median-cost fund administrator that provides high service to its members.
Sixty-one pension systems participate in the benchmarking service, including 33 outside the United States. CEM compared OPERS to a custom peer group of 13 U.S. pension systems for data through the end of 2022.
Doll said OPERS’ total pension administration cost of $52 per active, inactive and retired members was $29 below the peer average of $81. A key reason is the system’s investment in information technology. Other reasons include pension administration, governance, financial control, human resources and building and utilities. Investments costs are measured separately.
One reason is that OPERS has 1.3 front office full-time employees per 10,000 members, vs. a peer average of 2.4. OPERS also has lower costs per full-time employee and lower support costs per member than our peers.
Doll said that between 2015 and 2022, OPERS’ total per-member pension administration cost decreased 1.7 percent annually.
CEM’s report noted that OPERS’ total service score was 87, far above the peer median of 81, again in large part reflecting our technology investments. One recent improvement driving that score was that our turnaround time for disability benefit applications decreased from four months to three months.
Doll said CEM updated its service model to take a more member-centric view of service, reflecting that digital-first is now the highest service for most members and transactions. OPERS’ digital reach has increased from 57 percent in 2015 to 88 percent in 2022.
On the investments side, CEM’s database includes 284 pension funds (including 147 in the United States) that are compared regarding total policy return and asset allocation differences, net value added by staff, total investment cost vs. the benchmark cost and total risk of the investment portfolio.
CEM featured OPERS in a peer group comparison of 14 U.S. public plans of a median size of $111.9 billion.
Doll said OPERS’ 5-year net total return of 5.1 percent was below the U.S. public median of 5.9 percent and below the peer median of 6.6 percent. OPERS’ net value added because of active management came in at 0.05 percent, and our policy return (derived from the asset allocation set by the Board) was above the U.S. public plan median and in line with the peer median return.
OPERS’ total investment cost of 35.5 basis points was below its benchmark cost of 40.6 basis points, which CEM said means OPERS was a low-cost investor compared to our peers.
These costs decreased by 12.6 basis points over the past five years, primarily because of staff moving toward a lower-cost asset mix, CEM said, but also because we paid less than our peers for similar services.
CEM said OPERS’ asset risk of 11.7 percent was only slightly above the U.S. public pension system median of 11.5 percent.