More and more employers are outsourcing the administration of their Defined Benefit Pension Plans.
Defined Benefit Plan Administration has a different meaning to different people. Benefit calculation and certifications; plan sponsor and participant database; compliance monitoring; HR support, including a customer service center; and a customized web portal are all types of DB administration. So why are more employers looking to offload these responsibilities from their HR departments?
Plans are becoming more complex as new laws take effect, and many companies just don’t have the resources on staff to easily manage their pension plans. Defined benefit plans face several administrative challenges as new pension regulations are enacted, existing rules are changed, and company resources are limited. The ever-changing rules and regulations have made administration more complex and burdensome, making it difficult to keep in-house staff up to date and their plans compliant. Failure to maintain a compliant plan can have costly consequences, such as fines or penalties from the IRS, DOL or PBGC—or even possible disqualification of a plan.
There is no question that technology has moved defined benefit plan administration forward, making it easier to calculate and provide accurate data. The old-school way of having HR staffs calculate benefits using spreadsheets and in-house systems is no longer cost-efficient or a good use of resources. Also, replacing HR pension staff members is difficult once they retire, as they might be the only people who understand the full benefits of the plan. Achieving the greatest level of data accuracy is critical because plan sponsors and participants are making important decisions based on this data. Having a single solution for archiving the entire data history of the plan will lead to more accurate and accessible plan information.
In conclusion, outsourcing your Defined Benefit Pension Plan administration helps ease the burden on your HR staff while ensuring that your plan is meeting all of the required governmental compliance. The storing and collecting of past and current data can lead to a streamlined administrative service that’s accurate and saves time. Look into having your DB plan provider handle the day-to-day administrative needs of the plan, while allowing your HR department to focus on your company’s employees and strategic corporate HR initiatives. You just might find this way to be more efficient and cost-effective.