OPERS ranks well among its peers

CEM Benchmarking: System offers better service, lower cost than others

By Michael Pramik, Ohio Public Employees Retirement System

Dec. 5, 2024 – 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 at the OPERS Board of Trustees meeting in November that OPERS is a low- to median-cost fund administrator that provides high service to its members.

Seventy pension systems participate in the benchmarking service, including 37 outside the United States. CEM compared OPERS to a custom peer group of 13 U.S. pension systems for data through the end of 2023. 

Administration

Doll said OPERS’ total pension administration cost of $54 per active, inactive and retired members was $29 below the peer average of $83. When measuring what it takes to operate the system on a daily basis, CEM said OPERS’ costs of $48 per member was $27 below the peer average of $75.

One reason is that OPERS has 1.4 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, in large part reflecting our technology investments.

Doll said that between 2016 and 2023, OPERS’ total per-member pension administration cost decreased 1% annually, while peers’ per-member costs increased by 1.2%.

Service

CEM’s report noted that OPERS’ total service score was 88, far above the peer median of 81. OPERS’ self-service and web portal capabilities have directly contributed to the higher service score. One recent improvement driving that score was decreasing wait time for calls from 269 seconds to 153 seconds.

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 68 percent in 2016 to 83 percent in 2023.

An example of our expertise in processing, CEM said OPERS provides service purchase estimates in an average 2.7 days, while our peers average 41.2 days to provide service purchase estimates. We provide written pension estimates in 3.5 days, compared to 13.2 days for our peers.

For investments, CEM’s database includes 284 pension funds (including 145 in the United States) that are compared based on their 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 15 U.S. public plans with a median size of $107.8 billion. Doll reported the following key highlights for the Defined Benefit Fund:

Returns

• OPERS’ 5-year net total return of 8.2% was below the U.S. public median of 8.7% and below the peer median of 9.2%.
• OPERS’ 5-year, self-reported DB fund policy return was 8.0%. It was above both the U.S. public plan median of 7.5% and the peer median of 7.4%. If CEM standardized OPERS’ private equity benchmark to be like the peers’ and larger universe, the OPERS DB fund policy return would be 7.1%.

Value added

• OPERS’ 5-year, self-reported net value-add from Investments staff was 0.2%. That was below both the U.S. public median of 1.2% and the peer median of 1.6%. However, if CEM were to standardize OPERS’ more-competitive private equity benchmark to make it like that of its peers, the net value add would be 1.0%.
• The OPERS 0.2% value add for active management translated into about $1.1 billion cumulative value over the 5-year period.

Cost

• OPERS’ total investment cost of 0.359% was below the benchmark cost of 0.39%, indicating that OPERS was a low-cost investor compared to our peers.
• These costs decreased by 0.13% over the past five years, primarily because of staff moving toward a lower-cost asset mix, CEM said, and paying less than our peers for similar services.

Risk

• CEM said OPERS’ DB fund asset risk of 11.8 percent was only slightly above the U.S. public pension system median of 11.7 percent.