Mercer develops DB checklist
13 May 2011 New York
Image: Shutterstock
Mercer has developed a “checklist” to help defined benefit (DB) plan sponsors address challenges they are facing in today’s environment. Administering DB retirement plans has become increasingly difficult for many plan sponsors, due to factors such as frequent legislative and regulatory changes, mergers and acquisitions, and a lack of in-house resources and institutional knowledge to effectively manage the growing complexity and risk associated with these programmes.
This checklist is also beneficial for plan sponsors who are looking to improve their administrative processes and/or are contemplating moving their DB plan to a new co-sourced or outsourced relationship.
“Many of our clients have become increasingly concerned about administering their DB plans in-house,” said Andrew Yerre, defined benefit business leader for Mercer’s US Outsourcing business. “This concern is the result of many different factors, including complex legislation, legacy plan designs, and poor or missing historical participant data. As a result, many manual and inefficient processes often exist as workarounds, increasing the risk of administrative errors that can have negative consequences for both plan sponsors and participants. Following our checklist will help mitigate these risks.”
Following is Mercer’s DB plan sponsor checklist:
1 – Aggregate and improve data quality – Consolidate historical participant information from all sources into an electronic, secure database and resolve legacy data issues including missing and conflicting information
2 – Certify outstanding calculations – Ensure all prior plan and terminated vested calculations have been completed and certified
3 – Ensure plans are current and compliant – Validate that plan documents, required participant forms/communications and Summary Plan Descriptions are in compliance with recent legislative changes
4 – Review and document procedures – Document current administrative procedures and plan practices to clarify details not present within legal plan documents, address ambiguous provisions and avoid unintended changes in administrative practice in connection with the transition to a new administrative system or provider
5 – Evaluate sourcing options – Determine if you have the resources, experience and organisational commitment to successfully maintain plan administration, or if outsourcing or co-sourcing is a more viable option
“In response to increased demand from plan participants for benefit estimates, plan sponsors will need to review and prepare their current data, processes and documentation,” said Marceline Pankros, principal in Mercer’s Retirement, Risk and Finance business. “Additionally, if a plan sponsor is moving to a new plan administrator or preparing a plan for a freeze or termination, engaging in these ‘pre-sourcing’ activities will allow them to move quickly as business or market conditions change in order to capitalise on the opportunities to save on plan costs and/or reduce plan risks.”
This checklist is also beneficial for plan sponsors who are looking to improve their administrative processes and/or are contemplating moving their DB plan to a new co-sourced or outsourced relationship.
“Many of our clients have become increasingly concerned about administering their DB plans in-house,” said Andrew Yerre, defined benefit business leader for Mercer’s US Outsourcing business. “This concern is the result of many different factors, including complex legislation, legacy plan designs, and poor or missing historical participant data. As a result, many manual and inefficient processes often exist as workarounds, increasing the risk of administrative errors that can have negative consequences for both plan sponsors and participants. Following our checklist will help mitigate these risks.”
Following is Mercer’s DB plan sponsor checklist:
1 – Aggregate and improve data quality – Consolidate historical participant information from all sources into an electronic, secure database and resolve legacy data issues including missing and conflicting information
2 – Certify outstanding calculations – Ensure all prior plan and terminated vested calculations have been completed and certified
3 – Ensure plans are current and compliant – Validate that plan documents, required participant forms/communications and Summary Plan Descriptions are in compliance with recent legislative changes
4 – Review and document procedures – Document current administrative procedures and plan practices to clarify details not present within legal plan documents, address ambiguous provisions and avoid unintended changes in administrative practice in connection with the transition to a new administrative system or provider
5 – Evaluate sourcing options – Determine if you have the resources, experience and organisational commitment to successfully maintain plan administration, or if outsourcing or co-sourcing is a more viable option
“In response to increased demand from plan participants for benefit estimates, plan sponsors will need to review and prepare their current data, processes and documentation,” said Marceline Pankros, principal in Mercer’s Retirement, Risk and Finance business. “Additionally, if a plan sponsor is moving to a new plan administrator or preparing a plan for a freeze or termination, engaging in these ‘pre-sourcing’ activities will allow them to move quickly as business or market conditions change in order to capitalise on the opportunities to save on plan costs and/or reduce plan risks.”
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