As the professional services industry continues to navigate a competitive labor market complicated by higher-than-average employee turnover rates and the shift to hybrid work models, traditional defined benefit (DB) pension plans can be an effective differentiator for existing and future employees alike. Still, delivering pension benefits requires plan sponsors to navigate the challenges of ongoing pension administration, risk management and evolving employee expectations — often with limited staff. And since most DB pensions have been in place for several years, the plan’s administration solution may be outdated or inefficient. As a result, many professional services firms may be missing out on the benefits of modern pension administration solutions.

If your company hasn’t evaluated its pension administration lately, the good news is that a range of options are available to help you streamline processes and reduce administrative burden while providing your plan participants with a robust online self-service experience. Today’s administrative options are flexible, providing the ability to choose the right level of technology and expert support to fit your unique specifications.

• For firms that prefer to handle plan management in-house: Online technology tools can help facilitate participant interactions, run online pension estimates and provide a centralized repository for plan documentation, summary descriptions and forms.
• For firms that want to streamline and automate plan administration: Modern pension administration systems (PAS) offer “co-sourced” options that provide recordkeeping, reporting and calculations, and online experiences for participants.
• For firms that want to outsource administration and plan service: Expert third parties can take on some or all of the plan’s administrative functions and provide online portals and self-service centers to assist participants.

If it’s time for your company to take a fresh look at everything from enhanced pension administration technology tools to outsourced services, here are three essential areas to consider:

1. Reduction of Risk

With the scale and complexity of today’s pension plans, firms that rely on manual processes for all or part of their administration are likely taking on unnecessary risk related to pension calculations and compliance.

Co-sourcing and outsourcing options provide PAS platforms that bring a plan’s data together in a single, centralized pension database. Then, plan-specific automation helps to ensure plan provisions are consistently applied, data updates are timely and calculations are correct, reducing the opportunity for data inconsistencies and overpayments (or underpayments). These modern PAS platforms provide the ability to produce on-demand calculations, using real-time participant data and the flexibility to make adjustments as plan rules change.

From a compliance perspective, the streamlined processing creates increased transparency through detailed data audit trails, showing when changes were made, who made them and the resulting new values. The increased transparency ensures issues can be quickly identified, addressed and minimized. The detailed information also assists with audits, both internal and external.

PAS automation can significantly streamline the compilation of the annual data extracts required by plan actuaries to calculate pension liability. Built-in validations and verifications save actuaries and plan administrators time by minimizing questions and separate data requests. In addition, outsourcing options allow your selected third-party administration vendor to handle annual 5500 filings and funding notices as well as interact and share data directly with your pension trustee, actuary and auditor.

2. Administrative Efficiency and Security

Pension administration systems automate pension calculations based on each plan’s unique and often complex rules. End-to-end automation of calculations increases accuracy and reduces administrative time dedicated to calculations and verifications. Through automated administrative processes, the systems are able to initiate, calculate and process monthly pension payment instructions and then automatically complete payment reconciliation between the PAS and the payments made.

The systems also greatly streamline case management workflow and participant interactions through:

• Storage and organization of correspondence and historical documents
• Day-to-day management and tracking of participant requests and transactions
• Customizable workflows that trigger based on data updates, status changes or upcoming milestones

Pension administration involves extensive private information that must be protected. When selecting the appropriate level of administrative support, evaluate the end-to-end data security to ensure it’s compliant with the Department of Labor’s cybersecurity guidance. For example, whether you elect to utilize online technology tools to administer the program yourself or choose co-sourcing and outsourcing options, PAS security should enable different user access levels based on each user’s roles. Data access and actions can be defined for each level, helping to protect sensitive data. All access to the system by administrators and participants should always require multi-factor authentication at login.

When evaluating PAS and plan providers, do a deep dive into their cybersecurity practices, procedures and track record. Ensure that contracts include ongoing compliance plans to keep pace with changes in security standards and detailed action plans in the event a data breach occurs.

3. Participant Experience

Employees have high expectations when it comes to accessing pension information and services. Across the different levels of pension administration support, participant-facing capabilities are front and center.

In professional services, providing employees with a sophisticated online experience is often considered table stakes. Co-sourcing options offer robust online portal experiences that make information user-friendly, secure and immediate. Best-in-class pension portal experiences include access to plan information and pre-filled forms, real-time calculation of current or future payments, and secure self-service options. These robust capabilities enable participants to complete tasks like making plan elections, updating beneficiary information or maintaining address, tax and banking information.

For employees who may be less tech-savvy, outsourcing options combine the rich online portal capabilities with a participant service center. Employees can talk to experts who can answer their questions and provide guidance as they navigate the retirement process. In many cases, co-sourcing and outsourcing options also offer onsite participant meetings to help build awareness and understanding of pension benefits.

The professional services industry experts at CBIZ can help optimize your pension administration to meet the needs of your firm and your employees. Connect with a member of our team and gain access to more resources here.

This article includes input from Todd Flessner, VP of Pension Administration, and Greg Solley, VP at CBIZ Retirement & Investment Solutions. Their team provides implementation and ongoing service delivery for defined benefit and defined contribution plans to employers.

Third-party administration, actuarial and other consulting services offered through CBIZ Benefits & Insurance Services, Inc.

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