Case study: An integrated solution for taking DB plan administration online

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By Jean Smith | 03 October 2011

The challenge: Unsatisfactory DB plan administration

A client approached Milliman with concerns over the administration and operational compliance of the parent company’s defined benefit pension plan with 12,000 members. The parent company had used an actuarial group for benefit calculation support for years but was no closer to employee self service, online pension modeling, and consistency of calculations, despite performing over a thousand calculations each year. Due to the company’s many acquisitions and divestitures, the data was as fragmented as the 37 underlying benefit structures of these groups. There was no clear mechanism in place to track bifurcated benefits and past amounts paid. The client was concerned about cost, timeliness, data integrity, complexity, and PPA benefit statement compliancy. They also were worried about the risk of underpaying, overpaying or duplicating payment to participants.

The solution: Implement an online system to consolidate data and plan rules

Our experience has shown that clients benefit from an outsourced solution with a single pension administration system. The system calculations and database are used by the administration team, client, actuary, call center, and participants alike for pension administration and related projects.

  • We worked with the client’s IT group to consolidate and integrate pension data from four legacy payroll/HR systems and six secondary sources.
  • We worked with the client’s benefits administration group to identify and convert 6,250 paper and 4,350 fiche participant folders to electronic format.
  • We reviewed all plan documentation with the client and compared it to administration and benefit calculations.
  • We developed detailed functional specifications for all groups to guide plan administration and benefit calculations for review and approval by the client.
  • We automated the benefit calculation process to expedite calculation turnaround.
  • We captured the lump sum payment history and consolidated it into the administration system.
  • Participants can view their data online to resolve any data disputes before retirement.
  • Participants can model their pension online 24/7 and see details of their pension calculation online.
  • Participants can also request retirement paperwork and monitor the status of these requests online, which greatly reduces turnaround time for calculations and call volume related to paperwork status.
  • Participant inquiries were transferred from the client’s staff to our full-service call center.

The outcome: Faster and more accurate pension calculations

Immediately following completion of the nine month implementation timeline, pension administration became much more consistent. Calculations were done through a single unified system instead of through spreadsheets.

  • Milliman worked with the corporate attorney and benefits group to resolve 54 gaps between plan documentation and administration/benefit calculation through plan amendments and/or VCP program.
  • Milliman reduced pension request turnaround by over 80% from an average of four months to an average of two and a half weeks.
  • Milliman reduced overall plan expenses while offering additional participant services.
  • Milliman coordinated with the plan actuary to provide a consolidated, aggregate file five weeks after plan year end.
  • Milliman prepared new Summary Plan Descriptions for the 37 groups and made them available online to participants.

Lessons learned

The client is pleased with the efficiency of the new outsourced process with the Milliman team and has been able to reallocate internal Benefits Department staff away from pension to other business-centric needs. The actuary can prepare annual costs based on cleaner reconciled data. Participants are happier with quicker turnaround on pension requests and a clear view of their pension data, all while benefitting from knowledgeable service center support and online tools for their pension needs.