FROM: Joe Michael, Chief Information Officer
SUBJECT: Informational: Pension Administration System Modernization and Procurement Planning
RECOMMENDATION:
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Pension Administration System modernization planning and intent to seek consulting services to support the evaluation and procurement of SBCERA's future Pension Administration System.
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BACKGROUND:
SBCERA's Pension Administration System (PAS) is one of the organization's most critical technology platforms, supporting the administration of retirement benefits and services provided to members, retirees, beneficiaries, and participating employers. SBCERA has utilized LRS PensionGold (PG) as its core PAS since 2005 and has made investments over the past two decades to modernize, enhance, and adapt the system as SBCERA's operational requirements have evolved.
The current PG Version 3 platform was approved by the Board of Retirement in 2010 and fully implemented in 2014. Although it has been enhanced in the intervening years, its underlying architecture and core technologies originated primarily in the 2006-2008 timeframe. The architectural limits of nearly twenty year old technology are increasingly apparent as SBCERA's cybersecurity, integration, fraud-detection, workflow, internal-control, and digital-service requirements have evolved.
SBCERA has continued to invest in PensionGold, most notably through the Refresh Project from late 2020 to early 2023. That effort redesigned business processes, reduced unnecessary customizations, adopted available base-product functionality, and extended the useful life of Version 3. It was not intended to, nor did it replace the platform's underlying architecture.
Staff believes now is the appropriate time to evaluate SBCERA's next-generation PAS strategy. The existing system remains stable enough to support SBCERA through a multi-year procurement and transition, but its architectural constraints increasingly require custom development, workarounds, and supplemental tools to meet modern operational and security needs. Independent security testing, evolving fraud and cyber threats, internal-control requirements, and advances in the PAS marketplace indicate that continued incremental investment alone is unlikely to provide the long-term solution SBCERA requires. LRS has indicated it will not be able to support most of SBCERA’s next generation enhancements requests unless we are willing to move to its Version 4. That move would be an entirely new implementation.
Accordingly, staff intends to initiate a competitive RFP for an independent PAS consultant to help document requirements, assess the marketplace, recommend an appropriate procurement strategy, and support evaluation and selection of a future solution.
This action does not represent a predetermined decision to replace PensionGold, select a particular successor platform, or use a specific procurement method for the future PAS. The consultant engagement will provide an independent assessment of available solutions and help SBCERA determine the most appropriate long-term solution and procurement approach based on the market and SBCERA's requirements.
No Board action is requested at this time. Staff intends to conduct the consultant procurement in accordance with SBCERA policy and return to the Administrative Committee and the Board with a recommended consultant, proposed contract, and associated funding request before beginning the engagement.
Additional background and perspective follow below.
BACKGROUND AND SYSTEM HISTORY
SBCERA has periodically modernized its pension administration technology as business needs, technology, and service expectations have evolved. Major transitions have included replacing the County's mainframe-based system, adopting client-server technology, and moving to the browser-based PensionGold Version 3 platform currently in use.
The following table summarizes the major milestones in SBCERA's pension administration technology over the past 25 years:
PAS Technology Lifecycle
|
Period |
Milestone |
Purpose / Significance |
|
Prior to 2002 |
County "RT" Mainframe System |
SBCERA's pension administration functions operated on a County mainframe-based system. |
|
November 2001 |
PAS Replacement RFP Issued |
SBCERA initiated a competitive procurement to replace the RT mainframe system. |
|
January- May 2002 |
PensionGold Version 2 Selected |
Staff selected LRS in January 2002; the Board approved the selection in May 2002. |
|
March 2005 |
PensionGold Version 2 Implementation Completed |
SBCERA completed its transition from the County mainframe environment to a dedicated client-server pension administration platform. |
|
November 2010 |
PensionGold Version 3 Migration Approved |
The Board approved migration to a new browser-based generation of PensionGold. |
|
Period |
Milestone |
Purpose / Significance |
|
March 2014 |
PensionGold Version 3 Implementation Completed |
SBCERA completed the transition to Version 3, whose core architecture and technologies were developed primarily during the 2006-2008 period. |
|
February 2020 |
PensionGold Refresh Planning Initiated |
The Board approved engaging Linea Solutions to assist SBCERA with business-process review and development of requirements for a potential PensionGold Refresh. The COVID-19 pandemic subsequently extended the planning and requirements-development period. |
|
December 2020 |
PensionGold Refresh Project Approved |
Following development of the project requirements, the Board approved the PensionGold Refresh Project, and associated PensionGold changes. |
|
May 2023 |
PensionGold Refresh Project Completed |
The Refresh extended the useful life and improved the maintainability of Version 3 while retaining its underlying architecture. |
|
2024-2026 |
Long-Term PAS Evaluation |
Increasing integration, cybersecurity, fraud-prevention, internal-control, workflow, and digital-service requirements led staff to evaluate SBCERA's longer-term PAS strategy. |
|
2026-2027 |
Proposed Competitive Market Evaluation |
Staff propose to procure independent consulting expertise, establish future-state requirements, and competitively evaluate next-generation PAS solutions. |
Although PG Version 3 has continued to receive enhancements since its implementation, much of its underlying architecture was developed using Microsoft technologies that predate today’s modern .NET platform. While individual components can be updated, the core system remains based on an earlier generation of technology. The system remains operational and continues to support SBCERA's core pension administration functions; however, SBCERA has increasingly encountered limitations in integrating a platform designed during an earlier generation of application development with today's technology, business-process, internal-control, and cybersecurity requirements.
2020-2023 PensionGold Refresh Project
By 2020, SBCERA's business processes had changed significantly from those used when Version 3 was designed. Evolving legal interpretations, operational requirements, and business needs had resulted in numerous customizations and out-of-system workarounds.
At the same time, functionality that once required SBCERA-specific customization had become available in the standard product. Existing customizations made those features harder to adopt and increased the complexity of new builds, in some cases extending implementation to six months or longer.
In February 2020, the Board approved engaging Linea Solutions to assist with business-process review and requirements for a potential PensionGold Refresh. COVID-19 extended the planning period, and the Board approved the Refresh Project in December 2020.
The project combined fixed-price PensionGold changes with Linea's project management, business-process analysis, and process redesign services.
Using Lean Six Sigma methodologies, staff and Linea identified efficiencies, reduced unnecessary customizations, transitioned to base functionality where practical, and realigned PensionGold with SBCERA's operating model.
Completed in May 2023, the Refresh reduced technical and operational complexity and extended the useful life of Version 3. It was not intended to replace the core technology on which Version 3 was built.
That distinction is central to the current evaluation: the Refresh improved how SBCERA uses PensionGold; however, we have determined the underlying platform can no longer provide the flexibility, security, integration, and controls needed to support SBCERA’s pension administration for the long-term.
CURRENT TECHNOLOGY AND OPERATIONAL CONSIDERATIONS
PG Version 3 continues to perform SBCERA's core pension administration functions and will remain critical during any future transition. Staff have, however, identified several architectural limitations that increasingly affect modern technology and business practices.
System Integration and Architecture
Modern enterprise applications increasingly exchange information in real time through application programming interfaces (APIs), webhooks, and other standardized integration technologies.
PG Version 3 was developed under a different application model. API capabilities are limited, and SBCERA generally cannot independently establish modern API, webhook, or asynchronous integrations. Available integrations typically require vendor-developed interfaces or customer-specific development. For the most part, LRS is unable to accomplish this in Version 3.
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This hinders SBCERA’s ability to defend against the new generation of AI attacks because it limits efficient integration with cybersecurity and fraud-detection platforms. Additionally, this limits integration with customer relationship management tools, communications systems, document management, data platforms, and other enterprise applications.
Configuration and Application Management
Contemporary enterprise applications increasingly favor configuration over customization, allowing authorized administrators to modify business rules, workflows, communications, forms, and user-facing content without software development.
PG Version 3 remains comparatively dependent on custom development. Even minor changes to portions of mySBCERA and EmployerDirect can require a new application build unless SBCERA previously commissioned client-configurable functionality.
Correspondence presents similar challenges: SBCERA can create correspondence and data fields, but LRS may need to develop or modify the front-end interface before staff can use them effectively.
This model increases vendor dependency and can add time and cost while reducing SBCERA's ability to respond quickly to operational, legislative, member-service, and security needs.
Workflow and Business Process Automation
SBCERA's workflow platform uses newer technology than portions of PG Version 3, but it operates alongside rather than as an integrated component of the core application.
As a result, completing an action in PG does not necessarily advance the related workflow, and workflow completion does not ensure application activities occurred in the required sequence.
Staff has added polling processes that look for PG changes and advance workflows, but these workarounds introduce timing and performance considerations and do not provide true event-driven integration.
These limitations affect process metrics, accountability, quality control, and management's ability to accurately measure work in progress.
Internal Controls and Segregation of Duties
The current security architecture creates challenges in implementing the granular internal controls expected of SBCERA as a public retirement system.
PG Version 3 security is generally page-based: a user granted access to a page may perform the functions available there. This can conflict with segregation-of-duties requirements where one employee prepares an action and another independently reviews or approves it.
Where SBCERA requires different authority levels within the same application area, customized security functionality is necessary to separate responsibilities.
More granular controls have been raised through financial and other audits and remain an ongoing concern for Fiscal and management. As SBCERA's control environment has matured, configurable role-based permissions, approval authority, and separation of duties have become increasingly important.
This is more than a technology preference: PAS security architecture directly affects SBCERA's ability to design, enforce, and demonstrate effective internal controls.
A solution should support granular, configurable role-based security, including separation of preparation, review, approval, and administrative functions, without extensive custom development.
Document and Records Management
The current platform limits how documents can be added to a member record. Documents generally must enter through established processes, third-party tools, email-related processes, or a client-contact record.
This can create unnecessary steps, such as recording a client contact when a member simply submits an updated form or document.
Portions of the imaging environment also have not received substantial functional modernization since approximately 2012-2013.
Document intake, indexing, workflow, retention, and integration with broader content-management capabilities will therefore be important in the future evaluation.
Member and Employer Service
SBCERA's digital-service requirements have expanded substantially since Version 3 was designed.
The platform provides mySBCERA and EmployerDirect, but portions cannot be modified without vendor development. CRM functionality is also limited, restricting a comprehensive view of member interactions across service channels.
The environment also does not readily support capabilities such as telephone screen-pop or broader integration of member contacts across communication channels.
A solution should support a more integrated service model in which pension administration, member interactions, correspondence, documents, workflows, and digital services operate as coordinated functions.
CYBERSECURITY AND FRAUD CONSIDERATIONS
Cybersecurity requirements have changed substantially since PG Version 3's core architecture was developed.
SBCERA has invested significantly in modern threat detection, secure access, identity controls, network security, data protection, continuous monitoring, and independent security assessments.
Recent security testing identified vulnerabilities in the PG environment that were remediated by the vendor. While this demonstrates effective vendor partnership, it also reinforces the long-term challenge of securing an application built on architecture nearly two decades old.
At the same time, AI-enabled attack tools, identity-based attacks, residential proxies, credential abuse, and increasingly sophisticated fraud techniques allow malicious actors to operate at a scale not contemplated when Version 3 was designed.
SBCERA's monitoring of fraudulent online enrollment activity further demonstrates the need to integrate pension administration with modern identity verification, behavioral analytics, fraud detection, security monitoring, and automated response capabilities.
The activity did not establish that PG caused the fraud; it highlighted the importance of an architecture that can rapidly incorporate new security and fraud-prevention technologies.
SBCERA will continue necessary security and fraud-prevention investments in Version 3 during any transition. A solution, however, should provide the ability to seamlessly integrate cybersecurity, identity, auditability, and fraud prevention with the existing architecture.
THE NEXT-GENERATION PAS MARKETPLACE
The pension administration marketplace has evolved, with vendors - including LRS - offering newer-generation platforms built on more current technologies and architectures.
Given the significance and expected useful life of the next PAS investment, staff believe SBCERA should first define its requirements and evaluate the available market rather than presume that any particular platform or procurement path is the appropriate long-term solution.
The consultant will help SBCERA assess available solutions and recommend an appropriate procurement strategy. Any evaluation will consider ability to satisfy SBCERA’s requirements and functionality, together with architecture, configurability, cybersecurity, integration, support model, implementation approach, ongoing operating costs, product roadmap, and long-term adaptability.
Cost alone is not expected to determine selection. Differences in architecture, capabilities, service models, and reliance on configuration versus customer-specific development may materially affect both value and long-term sustainability.
ORGANIZATIONAL READINESS
SBCERA's internal capabilities have matured since its previous major PAS implementations.
SBCERA has established a PAS Support Section with dedicated staff supporting the current environment and future modernization.
Current management key staff also brings substantial experience with PG, business-process redesign, cybersecurity, infrastructure, implementation, testing, and project governance.
These resources and lessons learned should allow SBCERA to enter the next phase with clearer requirements and participate more directly in design, configuration, testing, data conversion, and implementation.
A future implementation will remain a significant multi-year undertaking depending on the solution, methodology, data conversion, and project complexity.
PROPOSED CONSULTANT PROCUREMENT
PAS evaluations and procurements are specialized and complex. Staff intends to issue a competitive RFP for an independent consultant experienced in assisting public retirement systems with PAS strategy and procurement.
The initial scope is expected to include assistance with:
• validating and documenting SBCERA's business, technical, security, integration, and operational requirements;
• evaluating current PAS marketplace capabilities;
• developing the future PAS procurement strategy and associated procurement documents;
• developing evaluation criteria and methodology;
• supporting vendor questions and proposal evaluation;
• planning and facilitating vendor demonstrations;
• assisting with technical, functional, financial, and contractual analysis; and
• supporting staff through development of a final solution and vendor recommendation.
The consultant RFP is also expected to request separate optional pricing for implementation project-management services.
Staff intend to initially recommend awarding only the evaluation, procurement, and vendor-selection scope. After a future PAS is selected, SBCERA will need to determine whether to retain the same consultant for implementation project management based on the solution, SBCERA’s need, project complexity, vendor methodology, internal resources, and the consultant's performance.
Optional implementation-management pricing preserves flexibility without committing SBCERA to a project-management model before the future solution is known.
ANTICIPATED TIMELINE
Staff currently anticipates issuing the consultant RFP in late 2026 and completing the consultant evaluation by the end of the calendar year, with the recommended consultant and contract potentially presented in early 2027.
Subject to Board approval of the consultant engagement, staff anticipates completing requirements and market analysis in early 2027 and determining the appropriate procurement method by second quarter of 2027.
Staff's preliminary goal is to complete the PAS evaluation and return to the Board with a recommended solution and vendor by summer 2027, while also developing sufficient cost information for SBCERA's budget planning process where practical.
Accordingly, initiation of the procurement does not eliminate the need for continued investment in PG Version 3. SBCERA will continue implementing necessary regulatory, operational, cybersecurity, fraud-prevention, maintenance, and other changes required to safely and effectively operate the existing system throughout procurement and implementation.
CONCLUSION
SBCERA has successfully used PG for more than two decades and has periodically invested in modernization as technology and business requirements evolved. The Version 2-to-Version 3 migration and the Refresh Project addressed different needs and helped maintain a stable pension administration environment.
Staff believe SBCERA has now reached another technology lifecycle decision.
The issue is no longer whether additional functionality can be added to Version 3, but that continued incremental investment can no longer provide the architecture, security, controls, integration, and flexibility SBCERA needs for the long-term.
Beginning the evaluation now allows SBCERA to act while PG remains operational and capable of supporting a deliberate multi-year transition, rather than waiting until technology or security limitations force a more urgent decision, leaving us potentially vulnerable.
The process does not presume a technology, vendor, or final procurement method. It is intended to define SBCERA's requirements, assess the marketplace, determine the appropriate procurement strategy, and provide the Board with the information needed for a long-term PAS investment decision.
Staff therefore intend to proceed with a competitive RFP for PAS consulting services and will return to the Board with the recommended consultant, proposed contract, and funding request before commencing the engagement.
BUDGET IMPACT:
Costs for this item are not included in the current year administrative budget. The use of contingency funds will be required to fund this item, and this will be brought back for the Board’s consideration as part of the RFP process.
Issuance of the consultant RFP will establish competitive pricing for the proposed advisory services. Staff will return to the Board with the recommended consultant, proposed scope, contract amount, and requested funding prior to commencing the engagement.
A future PAS implementation is expected to be a significant multi-year technology investment. At this stage, insufficient information exists to establish a reliable project budget.
Solutions differ materially in architecture, functionality, implementation approach, licensing, services, and reliance on configuration versus vendor development, all of which affect implementation cost and long-term total cost of ownership.
Developing reliable cost estimates will be an important part of the consultant engagement and subsequent PAS evaluation. Staff intend to incorporate available planning estimates into future SBCERA budgets as the process progresses.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Operational Excellence & Efficiency
Superior Service Experience
STAFF CONTACT:
Joe Michael
ATTACHMENTS:
None.