Our client asked Milliman to administer its frozen multiple-employer defined benefit pension plan. Previously, the client was frustrated with errors by its previous service provider and the lack of timely service. Participants often would not receive their pension calculations for several weeks, creating a lot of anxiety and costing the client a lot of time fielding phone calls. Errors in calculations and communications also added cost and time spent correcting the errors.
During the conversion from the previous service provider, we asked probing questions and looked at many sample calculations in order to adapt our ongoing processes to past practice. Milliman dug deep to ensure operational compliance. The prior provider was reluctant to share their calculations, only providing us with two partial samples from which to program our system.
During the implementation, we discovered that the prior provider had made numerous errors. In one example, our client contact reached out to the prior provider because he began getting phone calls from participants in another company’s pension plan. It turns out that the prior provider had put the phone number from another plan’s Annual Funding Notice on their Notice. He told the provider, “This is why we hired Milliman.”
After the plan was implemented, we noticed a calculation with a very large benefit. In most plans, the Internal Revenue Code Section 415 benefit limit is not an issue, but this plan had a very generous formula before it was frozen and had many older, long-service participants. It turned out that several participants had benefits that exceeded 100% of average compensation and the prior provider had not noticed. Paying benefits above the 415 limit is a compliance problem and, if not corrected, could cause the plan to be disqualified.
Milliman created a web site that participants could access 24 hours a day to produce their own pension estimates. Participants could also request retirement paperwork online, which greatly reduced turnaround time for calculations. We were able to transition participant inquiries from the client’s staff to our full-service call center, freeing up client time to focus on their business.
Milliman proactively examined the employee population and identified people whose benefits would be limited by Section 415. By correctly administering this rarely-seen rule, Milliman has kept the plan compliant and prevented excess money from being paid to retirees.
Pension administration became much more streamlined because calculations were automatically produced by our system and mailed within a few days, instead of being backlogged for weeks waiting to be done manually.
The client is thrilled with their new pension system and the support from the Milliman team. Even before the system was built, the client commented several times about how much more prompt and attentive the Milliman team was, compared with what they were used to. Calculations are not only more consistent, but they are produced more quickly and more accurately. The client has come to trust Milliman and has confidence that their pension plan is in good hands.