OPERS Aging Legacy IT System:

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1 OPERS Aging Legacy IT System: Metamorphosis to Modern Technologies State of Oregon: Public Employees Retirement System Category 5: Enterprise IT Management Initiatives Project Completion Date: June Project Sponsor Jordan Masanga, Chief Information Officer Oregon PERS 1

2 Executive Summary The Oregon Retirement Information Online Network (ORION) is an integrated set of technology tools used to manage data and processes for more than 350,000 member accounts and is the result of a $45M, seven-year project to modernize many aspects of information technology at the Oregon Public Employees Retirement System (OPERS). Along with replacing an aging legacy system with enhanced functionality for agency staff, it extends information access to employers, members, and third-party administrators. Several new system components have revolutionized how the agency conducts business by automating government-to-government, government-to-business, and government-to-citizen transactions. The project was initiated during a time of great turmoil for the agency as a major pension reform bill was passed in the 2003 legislative session. The bill created a new retirement program for employees hired after August 28, 2003, and moved all existing members into a new account-based program. Both of these changes to the retirement plan added a lot of stress to the information technology systems and operations of an agency already reeling from outdated technology, and inadequate system functionality. To address the new plan features, the agency embarked on a system modernization project. Instead of trying to incorporate the new programs into the existing legacy system the agency implemented the first phase of ORION, which among other things, transformed the way the agency collected wage and contribution information from more than 900 public employers using a web-based module called Employer Data Exchange (EDX). Today, EDX allows PERS to be one of the very few public pension systems that can claim 100% electronic reporting by its participating employers. After implementing the new plan components, the agency extended the modernization project to include the legacy retirement system. The ensuing six-year phase of the project put the agency on a growth path that led from near collapse to revitalization. The agency fought a constant battle between allocating resources to ongoing operations and the modernization effort, but succeeded in the following activities: replacing its legacy system with a new application and platform; introducing state-of-the-art technologies; automating many manual processes; and integrating the business into the development of quality IT processes. These achievements enabled the agency to fulfill its mission. We serve the people of Oregon by administering public employee benefit trusts to pay the right person the right benefit at the right time. The vision and goals for ORION were lofty and in the end, nearly all agency employees had a hand in delivering the new technology, and are now beginning to reap the benefits of their progressive efforts. 2

3 Business Problem and Solution Business Problem The Retirement Information Management System (RIMS) was a legacy application developed more than 30 years ago using COBOL, CICS, IMS, and other mainframe based components. By some estimates, RIMS provided only 80% of the needed functionality when it was delivered and that percentage declined steadily as the retirement plan underwent many rapid and significant changes in subsequent years. By 2006, estimates suggested that RIMS performed fewer than 50% of the needed retirement calculations on a consistent basis. This resulted in significant operational backlogs and ultimately, poor response time and customer service. This rapid succession of retirement plan changes, an under-investment in RIMS maintenance, a dramatic rise in the number of retirements to process, and unreliable data, created an environment of manual intervention, backlogged applications, and inaccurate calculations. Increasingly, PERS staff had been required to perform retirement calculations using offline systems (i.e., spreadsheets and separate databases) and manual calculations, driving up operational costs and reducing both efficiency and customer satisfaction. Business Solution The RIMS Conversion Project (RCP) was multi-phased to replace the legacy system (RIMS) with a modern application. The acronym ORION is used to refer to the new system, including its applications, associated enterprise architecture, and platform for providing pension administration services across all retirement programs. The platform includes pension administration functionality, electronic workflow and content management, contact management, and web-based self-service modules for employers, members, and third-party administrators. Taken as a whole, the new system automates many of the benefit administration processes performed by the agency and improves nearly every aspect of the agency s line of business applications. Ideas central to the strategy of the RCP were to automate as much as possible, and to dramatically improve stakeholder access to systems and data. Key project objectives included: Decommissioning legacy system functionality and transferring it to applications that coincide with the enterprise architecture; Instituting organizational and process changes with new system functionality; Integrating complementary and supporting automation technologies, such as: Electronic Workflow and Content Management; Contact Management; Member, Employer, and Third Party Administrator Self-Service, and; Call Center System Integration. Line of Business Application The foundation upon which ORION is built is a leading pension administration framework called Clarety. This framework provides the fundamental building blocks for 3

4 pension administration and is used by several state, county, and local government pension systems. The framework uses Java 2 Enterprise Edition (J2EE), Java, WebSphere, MS-SQL Server, and FileNet for its core technologies. Significance Implementation Approach The agency selected a framework rather than a Commercial Off-The-Shelf (COTS) product, or building the new system from scratch, because it provided the best opportunity for success in the dynamic environment that surrounds PERS. The Oregon retirement plan is regularly regarded as one of the most complex plans in the country. This fact effectively eliminated most COTS products, which are typically meant for retirement systems with a more standard plan structure. At the other end of the spectrum, building the system from scratch was ruled out because the additional time needed to build a new system, risked putting the agency into larger operational backlogs for a longer period of time. The selection of a system framework allowed the agency to get a head start on many of the fundamental elements of the system while focusing on the customizations needed to accommodate its complex business rules. It also allowed the agency to use a phased approach, so that modules of the new system could be put into production while others were still being developed. The agency partnered with HP, the developers of Clarety, for implementation services and with Provaliant for project management services. At its peak, the project was staffed by more than 70 HP business analysts and developers, seven Provaliant project managers, and more than 70 agency staff that filled roles as process owners, subject matter experts, testers, analysts, developers, technical support staff, and project managers. In all, the new system was installed in seven years at a cost of $45M, with major modules being released to production every months, starting in January The project was successfully completed when the last major module was put into production in June The implementation of ORION presented many challenges for the agency and required adept planning, project management, and a quality assurance process. One major challenge was that the modernization effort used technologies that were new to agency staff. Existing staff had skill sets aligned with the legacy system, but had no experience with the new tools. The implementation strategy had to address the immediate need of improving system functionality quickly, and the longer term need of ensuring that agency technical staff would be capable of maintaining the system. To address these concerns, the implementation plan included an embedding strategy that gradually incorporated agency staff into the HP development team as the project progressed. As agency staff became proficient in using the development tools and methodologies, they took on increasingly more complex assignments. Another challenge was the need to implement working functionality sooner rather than later. This led to a staged implementation process as opposed to a big bang implementation. The strategy identified the parts of the legacy system that were in the most distress and targeted them first for replacement. While this strategy addressed 4

5 some of the operational issues that the agency was facing, it greatly increased the need for solid project management due to a longer project timeframe, and significant coordination and interface issues with the legacy system. The extended timeframe also had the negative consequence of having the project span over three legislative sessions in which, not unexpectedly, changes to the programs were instituted that altered their characteristics and rules. After each legislative session, the project team was faced with evaluating and planning how each change would be incorporated into the implementation plan. The largest legislative change coming out of a session produced a $2.8M, 12-month extension for the project. Overall, changes accounted for $5.3M and 20 months of additional development time for change orders. Electronic Workflow and Content Management As a result of this project, one of the new capabilities incorporated into ORION was electronic workflow and content management. This technology, new to the agency, drastically improved productivity, accuracy, accountability, and customer service. The workflow and content management tool (FileNet) is loosely integrated into the Clarety application and manages key activities. There are approximately 80 workflows that track activities, move work through process steps, and store documents in the content manager. Under the legacy system, these activities were paper-based and prone to stall on someone s desk, or were occasionally lost. With ORION, every incoming employer and member document is scanned into the workflow and content management system, virtually eliminating lost documents and allowing access to documents simultaneously by agency staff. Now, all correspondence and documents produced by ORION, such as IRS 1099-R forms, letters, and annual statements, are automatically generated and stored in the content management system for easy retrieval and records management. Other features and benefits of electronic workflow and content management are: Repeatable processes that increase efficiency and accountability; Secure access to documents; Access to documents within minutes rather than hours/days; Reduced paper consumption and elimination of microfilming costs. Employer Data Exchange (EDX): Government-to-Government Transactions A key capability that was introduced very early in the project was the EDX (Employer Data Exchange). EDX is a web-based portal that enables employers (more than 900 state, county, and local government employers) to upload payroll and demographic data in a standardized format. In the legacy system this information was received by the agency sporadically, sometimes once a year, in multiple formats and oftentimes manually entered into the legacy system. The process was very time consuming and error prone. With EDX, employers can submit formatted files for batch processing during each payroll cycle. This new process and tools spread the reconciliation effort over a full 12-month period rather than accumulating the work for an entire year and 5

6 reconciling all at once. Data integrity and availability have improved significantly since the rollout of EDX. Key features and benefits of EDX include the following: Employers have a single, web-enabled entry point to report information; Data uploads are filtered through validation rules making data more accurate; Employers obtain information about their employees via online lookups; Employer payments are received via electronic funds transfer (EFT), decreasing costs for employers and PERS; Employers receive bi-monthly statements giving staff and employers better account tracking and reporting capabilities. Online Member Services (OMS): Government-to-Consumer Transactions One of the newest features of ORION is Online Member Services (OMS). Similar to EDX, OMS provides PERS members with a web-based portal that gives them access to their individual information and also lets them perform some activities online. One example is generating benefit estimates. As members become eligible to retire, they often want to model their retirement based on a number of variables before making a final decision. The OMS tool allows members to use their specific account information and calculate their estimated benefit based on various parameters such as effective retirement date, final salary, and leave accruals. Prior to OMS, members had to submit written requests to agency staff members, who would then calculate the estimate and send it to the member by mail. Turnaround time was weeks or months depending upon volume, current backlogs, projected retirement date, and staff availability. With OMS, members get instant turnaround and can create as many estimates as they want. At the present time, approximately 75,000 PERS members are eligible to retire and PERS staff complete more than 12,000 estimate requests per year with an estimated 1,700 in the queue at any given time. As the OMS adoption rate increases, the agency expects to reduce this backlog significantly, which will save time and resources and improve customer service considerably. Features and benefits of OMS include the ability to do the following: Download plan materials and forms; View account information and work history; Submit questions electronically for personalized responses; Obtain IRS Form 1099-R and payment history information; Submit change of address forms (retirees). Telephony Integration To improve the customer service experience and save staff time, the agency s phone system was interfaced to ORION. Now, when members call in, they can enter their PERS ID number and the system will bring up their account home page, when the call agent accepts the call from the queue. With the member s home page already displayed, the agent can immediately begin to verify the caller and address the caller s questions. This feature saves, on average, 30 seconds per call, improves response 6

7 accuracy, and gives customers the feeling that their time is being spent effectively. With an average call length of 4.5 minutes, this 30-second savings reduces the overall call length by about 10%. The agency s call center handles approximately 150,000 calls per year. In aggregate, this feature can save more than 1,200 hours of staff time per year. Benefits of the Project The need for ORION was inevitable, driven primarily by the desire to improve customer service and agency effectiveness. Since its implementation, the agency has seen improvements in accuracy, timeliness, and service levels, and expects to see more positive metrics in the future. Many of these will result in cost savings through more efficient transaction processing and will allow the agency to handle spikes in transaction volume without needing additional staff or resources. The following is a summary of financial and non-financial benefits that have been realized as a result of this project. Financial Benefits Elimination of Microfilming Costs 95% Reduction in Paper Usage in the Imaging Section 26% Reduction in FTE handling a 29% increase, in the Imaging Section workload ($235K/year) 1,200 Hours/Year in Labor Savings Ability to Meet Transaction Spikes with Existing Staff Non-Financial Benefits Improved Data Quality Repeatable Processes Better Access to Documents Fewer Lost/Stalled Documents More Effective Records Management Better Transaction Tracking/Accountability Efficient Wage and Contribution Reporting Improved Turnaround Time on Calculations Overall, More Effective Customer Service Improved Data Access/Transparency Conclusion In PERS quest to be a more process driven organization, three agency core values were identified: Integrity, Innovation, and Simplicity. The Oregon Retirement Information Online Network (ORION) supports integrity by providing customers with visibility to the pension calculation process and customer data, which builds trust through transparency. The project was an agency benchmark for innovation as the effort was implemented successfully due to the collaborative teamwork across divisions and sections within PERS. Simplicity was achieved by streamlining processes and removing duplicate work efforts. By supporting these agency core values, the project met the overall project success criteria of improving customer service and agency efficiency. 7