>> PRIYA MATHUR: Thank you for your thoughtful comments. Okay, this is just an information item.

So we are going to move on, seeing no further requests to speak, to agenda item number 10, workload inventory. Sorry. >> Good afternoon, Madam chairman, or Madam Chair and members of the Committee. I'm Donna Lum. Agenda item 10 is an information item. I'd like to start my report to you today with a message to our members and their families. For the past six months as we've worked hard to stabilize our new CalPERS system we have not provided the level of quality Customer Service that this organization has been known for. For some of our members we have been able to meet their expectations in meeting some service levels but for others we have fallen short. And for those members and their families for which we have been unable to meet service levels I apologize and I do thank them for the patience that they have exhibited. Every one of our CalPERS employees in the CalPERS family takes great pride in the service that we provide to our members and our employers. And like me, our staff are frustrated in that the level of service that they have provided to our customers has not met the expectations of which our customers have come to expect from us. With that being said we are making improvements and today I'll share with you how and where we're seeing those improvements. I'll also share with you where we're continuing to experience challenges. I'll briefly touch on areas where service levels and inventories are either at or near pre-launch levels, and I'll also provide you with a more detailed report on the areas in which we are experiencing large inventories and back logs. Let's important that I give you a clear picture of the significance of these challenges as well as an assessment of how we will overcome these challenges, and when we will see improvements. I've provided you with a report that reflects a snapshot in time where actual information is available, that information has been included in the agenda item and where necessary we have projected based on trends of inventory and work output in order to identify when we anticipate we would eliminate these back logs. Since the writing of this agenda, we have exceeded our projections in some service areas, and as I go through this agenda, this presentation, I'll update you in those areas but first I'd like to address areas that are again either at or near pre-launch service levels. The processing areas that are written in the agenda had experienced either large inventories or back logs either beginning before we launched or shortly after we launched. And there were several factors that contributed to the increase of these inventories. For example, work items that were held during the cutover period and the conversion period before we launched. We were also awaiting process enhancements. We had time-consuming manual work-around and as I've mentioned before, our staff went through a significant learning curve. But to overcome these challenges, we reprioritized our work. We redirected and we added temporary resources, as I shared with the finance Committee this morning. We've allotted overtime and our staff have worked it as they can, and

we've implemented system enhancements and a number of operational efficiencies. So as I proceed just as a reminder, we define a backlog as the quantity of items for which we are unable to process within an established service level. One example of significant process is with the direct deposits so in February we peaked at approximately 20,000 outstanding direct deposit requests. Through the use of system generated workload management reports, with the redirection of staff, and a focused effort through the utilization of overtime, we reduced this inventory to 2300 cases and requests, which is now considered to be current. at the writing of this agenda item we noted that we had 4500 cases, and in the last two weeks we've reduced that to 2300. There are additional improvements we've accomplished not noted in the agenda item and I'd like to provide those updates to you as well. An page 80 of your iPad we noted that there were 500 backlogged requests in which we had members that had been approved for disability retirement that were on the service retirement roll and we were unable to move them to the disability retirement roll. We now have 211. We've reduced that from 500 to 211. Also on page 80 in our comp review inventory, we noted that we had 1632 outstanding cases, and we are now down to 1285. And on page 81 in payroll processing we identified that there were about 110 non-compliant employers who had not yet submitted payroll, and that is now down to 60. So I share those numbers with you to demonstrate that in a short period of time as we have again started to see some areas of improvements, we are definitely seeing a reduction in some of the work inventory. So now to address areas where we've been unable to meet pre-launch service levels, which has led to, in some cases, very large inventories and a large backlog, specifically those in the areas of payroll-driven adjustments, postretirement death benefit cases, and service credit purchases. In all of these areas, our staff have worked very hard to provide the best possible Customer Service that they can to our members and our employers and our business partners. We've reprioritized the work, we've redirected resources, and as needed, to meet the most critical needs, we are now working closely with our developers, staff have been working overtime as I mentioned, and there is a tremendous amount of collaboration that is going on throughout this organization, where divisions are helping other divisions that are lesser impacted. Regarding payroll-driven retirement adjustments, I think as you know, most retirees require an adjustment to their monthly retirement benefit as a result of pay rolls that have been submitted after their retirement date. There are currently system issues which preclude staff from being able to process these adjustments in an automated and timely fashion. I'd like to refer you to Chart 1 on page 82 of your iPad. As you can see, we anticipate that our inventory for this payroll-driven adjustments will continue to increase over the next several months, and most likely peaking in July. We estimated that we would complete -- excuse me.

By August, we anticipate that there will be enhancements that will will be automated and allow us to significantly increase the number of cases that we can complete. We then anticipate that with operational efficiencies and cases that we identify as false positives which came out as a result of data anomalies that are being resolved, will increase our ability to reduce the backlog of these adjustments. We do strive as always to ensure that any financial impact on our members is minimal, and in most cases, the dollar amounts of these adjustments are low. There are approximately 70% of these cases in which the adjustment is about $50. And 86% of these adjustments are less than 100. So next I'd like to turn your attention to our post-retirement death benefit cases, which is on page 2 or excuse me Chart 2, Page 83. These cases represent one of the most complicated and time-consuming processes that we perform. This is primarily due to the coordination and the effort that staff must facilitate between beneficiaries, coupled with the review of detailed documentation. And we are working with beneficiaries and survivors at one of the most difficult times in their lives, when they are addressing the passing of a family member. And oftentimes, it is very difficult to get the information and the documentation that we need timely to be able to pay out some of these benefits. This area is extremely complex. When we consider again the complicated interaction, along with the needed system improvements, many of them do go back to our initial launch. We expect the inventory of these work items in this area to continue to grow over the next few months. Despite operational improvements, increased training and fixes to the automated system, death benefits decreased in February, and you'll see that on the chart. Primarily due to fewer workdays and a system issue that impacted processing for a period of time. In addition, the cost of living processing period in March reduced the amount of time that payments could be released, resulting in even lower productivity. So you can see in the chart, the dip over February and March. Through increased operational efficiency and system enhancements, we expect that the death benefits unit will complete more cases than we receive in June, and approximately 1700 cases per month being completed in the month of August. We have a significant release that is coming out on April 29th that has a number of fixes in the area of death benefits, and that how we're projecting our trend on. But I'd also like to update you with a little bit more information of what is in that inventory. The inventory is actually as of April 1st is 8500 cases versus the 9700 that were reported. The discrepancy in that number is primarily the reporting that is done in this area is being done manually, and unfortunately, there was a mishap in the counting that we had and the number was not reported correctly. We projected to complete 979 will 29 cases in April -- excuse me in Marchman the first two weeks of April we've completed over 560 so we're on a pace to exceed the projection for completing death benefit cases in April. Of this inventory, 48% of the cases that we have on hand are less than 90 days old. And

66% of those cases are less than 120 days old. And so again, I offer that information to you to give you a perspective of what we have in the inventory. There is a large number of cases, an estimated 7,000 cases, of which we are awaiting documentation. In those cases we are unable to process the death benefit until we receive the required documentation. To mitigate this area and to help improve the processing, we have begun the recruitment to hire 6 limitedterm positions. And as you can see in the chart again, August is when we expect the number of cases closed to exceed the number of cases that we're receiving. I also want to point out that in the inventory on Chart 2 includes cases where we are waiting reimbursement of warrants issued after death. So in essence, when we have been notified, received late notification of a death, in many cases, one, two, three or more warrants have already been issued. A recent analysis identified that 25% of the cases that we are awaiting documentation for, which is about 2500 cases, will result in no benefits being paid. These are cases where the amount of the overpayment either is equal to or exceeds the amount of the death benefit payable. The final area I want to address is service credit purchases. The level of precision required to ensure that cost estimates and expected benefits are accurate has made this one again one of our most challenged areas as it relates to system functionality. These challenges have led to an inventory of over 20,000 costing requests, approximately 75% of these requests are considered back logged. If you recall decisions that were made in changing factors last year resulted in a large backlog, and when we launched the system, we had approximately 10,000 cases on hand. The team in this area is taking every step possible to overcome the challenges that they have encountered since the launch. This includes assigning subject matter experts to work directly with our developers, and the creation of what we call a calculation lab, where we're able to take complex cases in and have them worked for those members that are either retiring or are needing service credit to vest. I know that there has been some confusion in the past about whether or not service credit can be used to vest, the types of service credit I'm talking about are those that are redeposits or arrears where the member has actually worked for the employer, the services for the employer. So turning to Page, or Chart 3 on Page 85, you can see that our anticipated productivity increases over the next few months, specifically surrounding the additional retirement service credit purchases which is also known as ARSC. This is significant for us because ARSC represents about 40% of our overall inventory. We estimate that by August, the cases closed will exceed the amount of cases that we receive each month, and therefore we will begin to reduce the backlog. One important thing and I know I've shared this with you before about the service credit costing packages is that historically less than 50%, and about 47%, of the members who request a costing package actually make an election. We do encourage and request that our members use our online service credit costing estimator as a tool in the first step of determining whether or not they want to

consider a purchase, and to date, we have not required members to obtain an online estimate prior to filing a request. However, we could explore the implications of such a requirement should this Committee would like us to do so. So that is my summary on the critical workload areas. And now I want to touch on the customer contact center. As you can expect, the back logs that I have just shared with you does have a direct impact in the number of calls that is coming into the contact center. One of the number-one reasons our members are calling the contact center is that they are inquiring about the status of a work item that they have submitted. But as I have demonstrated as the back office continues to reduce the backlog, we will continue to see a reduction in the overall calls in the contact center. In March, the call volumes were up for the same period of time compared to a year ago. However, both the member and employer wait times improved over February. Two charts on Page 87 in the agenda item provide a summary of the wait times for members and employers by intervals of months, including February and March. Again, we are recruiting 37 temporary agents to be trained and ready to support our members and our employers, and we will have them on Board and we will have them trained before the launch of the member self-service in July. The recruitment has been very successful, and we will be housing our new staff at the emergency operations center in Rancho Cordova. In conclusion I want to emphasize we are using all possible mitigation options to address our back logs in these business areas. We are also closely monitoring the I'm paths of payroll reporting on our annual member statements, potential impacts on benefit adjustments and retirement allowances and impacts that as you know related to health deductions on the retiree warrants. In addition, as we approach end of year processes that have not yet been run in production -- remember, we launched in September and we have several annual processes that we're working through -- we do anticipate that we will run into challenges. We will run into some errors. But the lessons learned of this team in conjunction with our project team is we are better positioned to identify those errors early on, as we are taking proactive steps to look at the processes and the data to ensure that we are doing everything that we can to ensure that we have tested and that we have been able to overcome any of those issues that we identify. CalPERS staff want to provide exceptional Customer Service to our members and employers. Our staff are accustomed to doing so, and as I mentioned earlier, Customer Service has been the hallmark of this organizationment so I want to close today with an area of personal concern. That is, the impact that our current service levels and the increased workload has had on our staff. We are balancing our mitigation efforts with staff needs. We are checking with our staff regularly to assess how they're doing. And we are taking time to recognize their extraordinary efforts. We ask for their input on how we can improve processes, and still we know how frustrating the situation has been for them, and we want to assure you and them that we are focused on these issues.

The level of dedication that this staff has displayed has made me very proud. It is remarkable, and I thank them for this. I also thank our customers for their patience and their understanding, as we continue to move through the elimination of these back logs. And more importantly, I also thank the Committee members for the support that they have provided to the staff and to the project. This concludes my report. And I am now able to answer any questions that you may have. >> PRIYA MATHUR: Thank you, Ms. Lum. We have two questions from the Committee, Mr. Feckner? >> ROB FECKNER: Thank you, Madam Chair, and thank you, Donna, for your report. And I know it's been a tough day for you. The press didn't help us any in the beginning of the day. But then again, first of all, I want to say, it disheartens me you apologize on behalf of yourself. We all either get it right together or we get it wrong together as a group, so when we apologize, we should apologize, so it should be "we" not "I" because we've all made mistakes along the way. However we look at it. A lot were things we had no control over or were able to foresee but I do want to say it falls on no one person so I want that to be very clear. I also want to say that I commend and support our staff, and so does this Board. The staff works very hard. I drop in in evenings sometimes, I'm here on weekends on occasion and I'm always humbled by the amount of cars I see in the parking garage and the amount of people in the building working. On their nights, weekends, et cetera, trying to be able to accomplish the tasks we have in front of us so we certainly know the staff is working hard but at the same time we know they're very frustrated. So what we want, what we need, is for you to help us help you. Nobody ever wants to ask for help. We get that but we all know you need help so we need some kind of a matrix or plan that we can be able to put together to assist you in getting to a better place than where we are now. We talk about better service levels in August. That's a third of a year away. We still are not able to drop down on these backlogs that we have. So are there other ways we can get to this point? I don't know. That's why I wanted to be able to sit down all of us and put our heads together to come up with this. We've talked about these 37, 40 people. We've been talking about them for months and they're still not here. They're still just an aberration ahead of us that's coming but it's not helping us with backlogs and that adds to the frustration on our staff. I also didn't hear any part in your report about the health branch and I know they're working hard as well, because they're going to have the same issues if they haven't had already in this PSR issue so we need to make sure that we keep that part in the loop as well so that's not the next shoe that drops, we need to make sure everybody is on top of everything. It's a very tough thing but I do wanted to say that from my perspective, again this is just my speaking, a satisfactory range of 70% is never good. I want 100%. And I know we're not going to get there but if we set our target at 70, that's where we're going to stop. That's where we'll be happy. I want to see us at 100%, and

no, we're not going to get there but we'll strive ever reday to get to that point. So that's why we need to help you get to that level of whether it's staffing or other ways of doing the business. We all need to be in this game together. Nobody should be out there on their own taking the hits so please, help us put a plan together so we can help you and help the rest of our staff make this very successful thank you. >> PRIYA MATHUR: Thank you. Ms. Wynne? >> PATRICIA WYNNE: Thank you very much. Donna, thanks for the great report. It's clear how hard you've been working and I really appreciate it. Just to dovetail with something that Rob said so you did make one really concrete suggestion on the service credit costing about how maybe you should ask people interested in pursuing that to do their self-calculation first with a 45% take-up. Maybe we could eliminate some of that backlog with just an easy kind of first step. So I mean, I would be supportive of having staff pursue that. That seems like a pretty simple way to clear out some of these cases, just right off the start and I really want to thank you for your hard work. >> Thank you. If I could add, in addition to our service credit costing estimator calculator that we have on hand, we also have an estimates calculator and when we look at the number of estimate that are being requested, there is a large majority of these estimates that are being requested for retirement dates that are a year or so out. So again we do want to encourage our members to use that service. We've also identified with some additional tools that we have with CalPERS that we have seen some trends where we have very young members who are submitting requests, service excuse me retirement estimate requests as well as costing requests, multiple times per month. And so with the ability to identify with the tools that we have this workload and the. [ Audio difficulty. Please stand by ] >> J.J. JELINCIC: Particularly when we talk to the consultants, we need to focus on the fact that it's not 8500 cases. It's not 8500 inventory. It's 8500 lives, and I think we need to start talking and communicating in those terms because words do have power. The backlog in death benefits, we talk about the fact that only 1/3 of them are over 4 months past-due. You know, that should be troublesome to all of us, and I think we need to think of it more in those terms than, well, 2/3 of them are not 4 months past-due. I am beginning to hear reports that some of the things that we had problems with, we fixed, have somehow started to become unfixed. And I'm wondering if you can identify some of those areas and how do we catch them more quickly? >> Ms. Lum: So one of the areas that I am aware where we have made modifications, we've amended members' accounts to address issues such as deductions, where we have erred either in taking too much of a deduction either for health or dental. We have seen some of these cases come back and reoccur after the modification and the correction is made.

This is an area of high priority that the project team is working on. Accenture is looking to identify what is the root cause of these errors that are reoccurring. We have a dedicated SWAT team specifically in the area of health deduction issues. This team is looking at the cases, identifying again attempting to identify the root cause of these errors. Outside of those, I am not familiar with any other type of processing errors, or processing change or system change that we've applied to the system that is taking us a step backwards in our processing. >> J.J. JELINCIC: One other thing I would like to add, is some people have felt I have been critical of staff. I want to acknowledge, our staff is busting their rearends on this. And you're right, our staff really does care about the mission, really does care about Customer Service. And the people who touch our members are much more frustrated than even the Board members, and I want to acknowledge that. >> Ms. Lum: Thank you. >> PRIYA MATHUR: Thank you. Dr. Diehr? >> GEORGE DIEHR: So just looking at the numbers, I guess taking the, what is it, the first -- retirement adjustments payroll, so it -- obviously, the jump from July to August and the ability to process 5,000 cases a month doesn't mean you're going to put five times in the number of people. You're really counting on significant systems improvements. >> Absolutely. >> GEORGE DIEHR: And that's true on all of them it looks like, that it's not more people. It's some dramatic change in the ->> That's correct. Specifically for the area of these payroll adjustments, this really is an automation fix. Once we have the ability to process these, there's very little manual intervention that takes place, and that's why you can see that we will jump from 1,000 to 5,000 to 6,000, 8 and 10,000, and this is without additional augmentation of staffing resources, because this is not a staffing resource issue. We believe that we can process and get back to normal levels with these changes. In the area of death benefits, what you don't see in the chart is factoring in the improvements that we will see with the additional 6 PYs. That will come in a future chart. What we've been trying to do is identify when we will have them on hand, what their training time will be, and then we're also looking at taking our processes and breaking them down so that we don't have to go through the full scale of training these new resources but identify the type of work that is less analytical in nature, less complex, and be able to put them into areas that will definitely make a difference in death processing. So with that, I shared, also, that this is another area that we have begun to exceed the projection that we started out with, and with the additional change that's coming at the end of April, the additional resources, and the increase in productivity, I would imagine that as I redevelop these charts with actual information -- so as I mentioned earlier, we've used actual where we could, we've used projections where we've needed to -- we will continue to update these and we will update them with the trends of the processing that we see from month-to-

month. >> But you're sort of speculating that some time I guess during the month of July you're going to have some system, some significant system improvements implemented. >> Ms. Lum: Yes, at the end of April we have the largest release launch. In that release there are a large number of fixes in all these areas. It takes about 45 to 60 days to see the actual efficiency when we implement a new enhancement. Part of it is that we reduce some of our processes. Our staff have to be trained in those processes and there again, it's all based on timing, and when we run the roll and when we do certain processes? >> GEORGE DIEHR: With respect to the backlog themselves, you talk about people making multiple requests but the time it takes to process them are some of these double counted? Is there one individual has 5 requests in the queue? If so, there's no point in counting other than the last one, right? >> Ms. Lum: Absolutely, so we have a group that is new to us, it's our business intelligence group. They're working with -- they're a part of IT. They are looking at this data that we have in these queues, and identifying certain trends such as, are we seeing multiple Helms with multiple requests? Are we seeing specific age groups or specific employers that are making requests? And so as we get the analysis completed on these numbers, again you'll see them refined and reflect the actuals. >> GEORGE DIEHR: Okay, thank you. >> PRIYA MATHUR: On the death benefits piece, I was really struck by your point that 7,000 of the 8,500 cases are awaiting documents. What would be I think interesting and perhaps a more telling piece of information is: What's the time since -- what's the time frame? How long has that been -- when was the last time we requested a document? And how long has it been out? Because some of these -- some of this backlog might not be CalPERS, on our shoulders but might be we're just waiting for something from the member or the beneficiary, the beneficiary I guess in this case. So I think that would be -- there's a more useful way to look at this information so that we can really see how much is a problem that we need to address, and perhaps the fact that there's -- perhaps we need to notify that beneficiary multiple times. Maybe there's something there in the process that we need to change that the beneficiary is fully aware that it's in in their court. I don't know exactly but it seems like there's something missing there, there's a disconnect if 7,000 of those cases -- I don't know how long the wait is, how long we've been awaiting documents -- but there's something we're not getting in the information that's being presented. >> Ms. Lum: So there is -- and you're right on the right track, Priya. In those cases, there are situations in which we've had our initial contact at the time of the death report, and we've reached out with a condolence letter. We've identified what information is needed. When we talk about reprioritizing, what we've done is we've identified specifically in the area of death benefit processing, those cases that are what we call ready to pay. We have all of the documentation. We need to put the effort into getting

those benefits paid out. This is an area in terms of that what we call a waiting docs queue. So as I mentioned in my presentation we know again there are a number of cases in those queues that will result in no benefit owed but at the same time we do need to close those cases and make communication with those beneficiaries or those survivors. We do have an effort that is under way to apply resources to do nothing but focus on working through this queue, to do the proactive measures that you've mentioned either to reach out or to identify, do we have the most important pieces of information and documentation for which we can make the benefit payment and continue to follow up on other documents that can come in after the benefit is paid? And so we're in that process right now of analyzing that queue. It is a very large queue. Before we launched in my CalPERS we'd have on average in this same situation about 4700 cases and in those cases we were able to pay the benefits timely. So it is a combination of both. It is a more proactive outreach that we can do on our behalf, and then there is the outreach that we've done and that we're still awaiting? >> PRIYA MATHUR: Okay. I think maybe we need to talk a little bit more about what kind of information would be useful to the Committee in terms of how long -when was the last contact? How long have we been waiting documents? There might be a little more data that would be useful so we fully understand the picture. >> Ms. Lum: The other thing that I would also share and it's in the agenda item is, it has been a challenge to be able to get the types of what we call workload management reports to be able to assess the inventory, to be able to analyze it and determine how best to address it. In the area of death processing, again where our biggest challenge is, is this work is manually counted. We have file drawers, we have tables, and we are -that's how we're getting to the inventory. And so again, I do believe that there are ways that we can start to improve the efficiency of the way we're processing. I understand that there is a fix -- there's a new feature that's coming in about 2 weeks that will enable us to input some of this reporting information that is currently not automated. >> PRIYA MATHUR: Okay, terrific. Mr. Schwartz? >> Howard Schwartzment. Thank you, Ms. Mathur. Donna, I want to thank you for your report but in a much broader and bigger sense, I want to thank you for your effort, and thank the executive staff for their effort. And all of the literally hundreds of staff people here at CalPERS that are working to make our systems work better and to serve our members better. I think if I can, for a moment, I'm uniquely positioned on this Committee in that as the Chief Deputy Director of DPA, I get a chance to meet with and talk with executive staff of departments throughout State government almost on a daily basis, and they bring to DP large, complicated projects that they're engaged in and are trying to figure out the best way in consultation with DPA to get through

these projects in the most economic, efficient way possible. And so I have a baseline on which to evaluate, I think, CalPERS' effort in solving the problems related to PSR and all of the system problems that you've brought to us in your report in a way that is, I think, unique, and in a way that I can compare to what other department's efforts are, and how they approach problems. And I can say unequivocally that CalPERS, you personally, and all of the many people that are working with you on your staff are doing an outstanding job, and are working at a level which is really unparalleled throughout State Government to respond to the problems, and mostly to help the members of our system. And I am proud to be associated with that. And I'm proud of your effort. And I think that the members are being served in an outstanding fashion by you and the staff here. It's a tough nut to crack. We've been working on it for a long time. I can say, speaking for myself personally, there was all last year numerous reports on the progress of PSR that were brought to the Board. There was absolute, full disclosure about the problems that we would encounter when we would go online, and the length of time that it would take to work through these problems and get to the end of the road. And we're in the middle of that. And I, for one, knew all of what I think we've been dealing with in advance. These problems come as no surprise to me. We're going to work through them the best we can, and with the incredible dedication and frankly heart there's felt sincerity that the staff carries for each and every member who's trying now to get their particular problem resolved, and as Rob said, and I support it 100%, this isn't your problem or staff's problem. This is all of our problem and we're going to get this thing taken care of. And it's going to get resolved and at the end of the day we're going to have a much, much better system. And the members of our -- of CalPERS, the members of our system, the hundreds of thousands of members, will be better off and better served, and so I just want to acknowledge that. I want to acknowledge your effort, and I want to acknowledge that when I look around State government, I can see no better effort and more heartfelt concern expressed and held towards getting the members of our system and the public better served and getting their problems fixed. >> PRIYA MATHUR: Thank you. I see no further questions from the Committee. I think you've heard the profound gratitude that this Board has for your efforts, and the efforts of the entire staff who have been working on what a really complex problems. I won't restate all the comments you've heard but I do hope that your staff knows just how much we value their time and energy, and that we acknowledge how challenging it must be for them as these problems persist and they continue to deal with customers who probably are not 100% satisfied today. But I see the light at the end of the tunnel. I do see that at some point, this is going to help us produce better, it be more efficient, deliver better services to our members, more services, better, higher quality services, and that that will make all of us a lot happier. It's going to take-offs little while to get there.