The retirement plan industry is ripe for digital transformation. For years, the industry has relied on legacy systems and processes that are no longer effective in today’s fast-paced digital world.
The COVID-19 pandemic has disrupted the retirement plan industry and has forced many service providers and recordkeepers to re-evaluate their businesses. The pandemic has highlighted the need for digital transformation in the US retirement industry. Service providers were compelled to manage clients remotely and customers demanded personalized services.
Digital transformation can help the retirement plan industry modernize its operations, improve efficiencies and reduce costs. It can also help service providers better meet the needs of their clients by providing them with more personalized services. To stay competitive, you must focus on the holistic modernization of your organization.
Beyond adopting IT solutions, you must rethink business processes to automate operations and serve customers better. Automating plan administration and modernizing your systems can improve efficiencies to better meet the needs of today’s plan sponsors and participants.
Legacy retirement plan administration systems are outdated software systems that no longer support operations optimally. These obsolete applications are difficult to maintain and often do not have the functionality required to meet the needs of today’s retirement plans.
They are not equipped to ensure compliance with ever-changing DOL and ERISA rules, regulations and policies, making retirement plan administration and recordkeeping a more significant challenge. Updating legacy systems every time is costly and time-consuming.
As the US workforce ages and more employees take multiple jobs, retirement plan administration companies find it hard to run on legacy plan administration systems. These systems were not designed to handle the increased workload or the complex calculations required by today’s retirees. As a result, they are often inaccurate and can cause significant delays in processing documents and payments.
In addition, these systems can be complicated to use, making it difficult for employees to serve customers appropriately. Data silos do not allow plan sponsors and participants to access their retirement plan data easily. Due to minimal data-sharing capabilities, these systems do not support personalization and self-servicing.
Retirement plan administrators and recordkeepers using legacy retirement plan administration systems may encounter some problems. These challenges include-
- Lack of integration and automation: Most legacy systems do not integrate well with modern computer systems, making it challenging to automate tasks or take advantage of new technological capabilities. It makes plan administration difficult and time-consuming.
- Outdated features and functionality: As technology has advanced, many legacy systems have not kept up. They may lack modern features and functionality to support the evolving processes of the retirement plan industry. It leads to inefficiency in data entry, processing, and reporting.
- High costs: Legacy systems often require expensive proprietary hardware and software, which can be challenging to support and maintain. They also tend to require professionals with specialized skill sets to configure and fix them. Owing to talent shortage and rising fee pressures, hiring a team for system maintenance is difficult for retirement plan administration service providers.
- Data silos: Legacy systems are often incompatible with current systems. The lack of integration results in siloed data and hinders information sharing for collaboration within an organization. It further results in processing inaccurate, outdated, or incomplete information, leading to operational and compliance issues.
- Lack of compliance: The regulatory landscape of the US retirement industry is constantly evolving. Legacy retirement plan administration systems often lack the functionality to keep up with the changing compliance landscape automatically. It puts retirement plan administration service providers at risk of non-compliance and hefty penalties.
- Inflexible: With the ever-changing needs of retirement plan sponsors and participants, a certain degree of flexibility is required from a plan administration system. Unfortunately, most legacy systems are inflexible, making it difficult to accommodate the changing requirements at scale.
- Vulnerable: Retirement plan administration involves handling sensitive participant information. This data is crucial and must be secured to avoid leaks or breaches. However, most legacy systems are not equipped with proper security features, leaving them vulnerable to attack.
These challenges of legacy retirement plan administration software make it difficult for plan administrators to provide a high level of service to their clients. They also make it difficult to comply with the ever-changing regulatory landscape. As a result, the industry is looking for ways to replace its legacy systems with modern retirement plan administration solutions.
There is no one-size-fits-all answer to this question. The decision to retire a legacy application should be based on several factors, including the following:
- Software age: Older software is more likely to have security vulnerabilities and may not be able to support newer features or compliance requirements. In addition, older software may be more challenging to maintain and support.
- Vendor support: If your vendor no longer supports the software, it may be time to consider replacing it. You will also have difficulty finding qualified staff to maintain the system.
- Maintenance cost: Calculate the overall cost of maintaining the software and compare it with a modern system. If the cost is too high, it is advisable to retire the legacy system.
- Level of integration: Using multiple disparate systems that do not share data or require manual data entries is inefficient and expensive. It consumes more time and does not offer the required accuracy of retirement data. It would help if you retired such applications to control expenses.
- User experience: Amidst rising competition, delivering a high-quality user experience to your customers and employees is essential. A legacy system often complicates customer service and does not enable data-backed customer assistance. It is better to discontinue using obsolete applications to control higher costs and dissatisfied customers.
- Technology: Sticking with an old system means not leveraging the latest technological innovations. It can make your business processes more complicated and expensive. You must update your systems to stay ahead of the curve and offer hyper-personalized services to your clients.
As you see, legacy retirement administration software becomes costly, inefficient, and outdated over time. It is important to discontinue using such systems to save money and improve customer satisfaction. Investing in a new system will benefit business continuity; however, a strategic approach will ensure sustainability.
Adopting modern retirement plan administration software is the first step in the digital transformation process. It would help if you had a strategic plan for a successful software adoption that supports automation and uses advanced technologies like AI and ML for a customized service. It will help improve the customer experience and enhance the efficiency of your recordkeeping business.
The following are the key steps you should take:
1. Evaluate your current system: The first step is to evaluate and identify the gaps. It will help you shortlist the features you need in the new system.
2. Research: Depending upon your needs, research the retirement plan administration solutions available in the market. Ensure the solution offers the required features and that the vendor provides operational support.
3. Move your data to the cloud: Keeping your retirement plan data secure during the transition is crucial. The best way to do this is by moving it to the cloud. Your data will be secure and easily accessible.
4. Train employees on the new system: After selecting a new one, train them on how to use it. Ensuring a smooth transition will help foster a culture of modernization throughout the organization and prevent disruptions in the transition process.
5. Implement the new system: Rethink your business processes to implement the new retirement plan administration software. Ensure all required features work as desired and all third-party integrations are in place.
By following these steps, you can easily and quickly retire your legacy retirement plan administration software and move to a new system that is more efficient and user-friendly.
A retirement plan administration software upgrade is a smart investment that will pay off in many ways. Especially amidst the ongoing retirement plan industry chaos of rising fee pressures and evolving compliance guidelines, a cutting-edge system is a must-have. It will streamline your recordkeeping and retirement plan administration processes to ensure efficiency and keep you ahead of the competition.
Here are some key benefits of adopting modern retirement plan administration software:
1. Increased efficiency: A modern system will automate many repetitive yet critical tasks previously done manually, saving you time and money.
2. Improved accuracy: By automating tasks and reducing the potential for human error, you can improve the accuracy of your data and reports.
3. Enhanced security: Modern recordkeeping systems offer increased security features to protect your data from unauthorized access or theft.
5. Better customer service: With a more user-friendly interface, your employees can easily find the information they need. AI and ML algorithms will quickly suggest the best approach and give personalized recommendations by analyzing participant data.
6. Regular compliance: An industry-oriented solution will keep track of all fiduciary regulations and stay up-to-date with the latest regulatory requirements. It will automatically ensure compliance and trigger alerts for new guidelines.
Congruent Solutions offers a wide range of retirement plan administration services that can help you overcome the challenges of the retirement industry. A team of industry-experienced professionals works closely with you to assess your legacy applications and detect areas of improvement.
We take the stress of digital transformation off your shoulders. From recommending processes that can be automated to configuring the retirement plan administration software according to your new business model, we partner with you throughout the process.
Our CORE Platform enables the seamless digital transformation of your legacy systems. It is a cloud-based platform equipped with advanced analytics to meet the critical needs of the retirement plan industry.
We can help you assess your needs and determine if replacing the legacy retirement plan administration software is the best option for your organization. Contact our team of experts today if you are considering retiring your legacy retirement plan administration software.