PensionsSeptember 10, 2024

Pennsylvania SERS Retains Empower, Aims to Save $1.4M per Year Under New Contract

According to the pension fund, changes under the new contract mean the financial services firm will have ‘some skin in the game.’

Reported by Michael Katz

The Pennsylvania State Employees’ Retirement System has rehired financial services company Empower as its third-party administrator. The firm submitted the winning bid in a request for proposals to oversee the pension fund’s restructured deferred compensation and defined contribution plans.

“Last fall the board issued an RFP that included a series of material changes in the scope of services for the plans,” said Pennsylvania SERS Executive Director Joseph Torta in a statement. “The biggest is modernizing the flow of money directly through the third-party administrator, as is the industry standard for these types of plans.”

Torta added that the aim of hiring a third-party administrator is “to give plan participants quicker access to their money while reducing plan costs.”

In May, when Penn SERS ended a year-long comprehensive RFP and announced its search for a third-party administrator, it announced the new contract would restructure plan administration for enhanced services and reduce administrative fees for participants of its deferred compensation and defined contribution plans by 35% each. The pension fund expected this would result in approximately $1.4 million in savings each year.

“We assembled a team to strategically restructure administrative processes and then draft an RFP that not only secures a vendor after the current contract expires but also changes the scope of services,” Torta said at the time, adding that the move “will materially reduce complexity and cost.”

According to that announcement, the new contract will allow plan participants to access their funds within an average of 48 hours, and participants’ contributions will be deposited in their accounts between five and seven days sooner than they were previously.

The RFP also included a requirement that 20% of the third-party administrator’s fees are at risk based on service-level agreement thresholds. “As a result,” Torta said at the time, “the winning vendor has some skin in the game to assure that their services don’t slip over time.”