The US retirement plan market is enormous, with an Assets Under Management value of USD 40 trillion. Despite its size, the industry has relied mostly on manual processes for almost all its tasks, from participant management and managing contributions to compliance testing and reporting.
The financial functions of retirement plan administration, like contribution management, investments, loans, benefits calculations, etc., involve intricate calculations, data management, and regulatory compliance. Each task needs to meet high standards of precision, accuracy, and timeliness. Managing thousands of plans, each with unique requirements can be daunting.
This manual approach has often led to inefficiencies, errors, non-compliance, and also hinders providing an exceptional user experience to the participants. This is where automation steps in to streamline the whole process, benefiting the plan sponsors, administrators, and participants.
What are the Complexities of Manual Plan Administration?
Retirement plan administration is complex and encompasses a number of financial processes, including contribution management, investment management, loan administration, fee management, and benefits calculations. Manually handling these tasks can be time consuming, error-prone, and often hinders the ability to scale operations as the number of participants and plans grow.
The Benefits of Automating Financial Systems
By automating the key aspects of retirement plan administration, companies can overcome major challenges. Here are some key benefits:
- Increased efficiency: Automated systems can handle repetitive and complex tasks, freeing time and resources to focus on human-centric activities such as participant satisfaction, plan design, and strategic planning.
- Enhanced accuracy: It can reduce errors and ensure accurate calculations, data processing, and reporting. This is crucial for improving participant trust and avoiding expensive compliance issues.
- Improved compliance: Automated compliance testing and reporting help organizations stay up-to-date with changing regulations and reduce the risk of penalties.
- Better participant experience: Automated systems make self-service options possible, giving them access to account information, making changes, and resolving issues easily. In addition to bettering the user experience, it also reduces the administrative burden on your employees.
- Data-driven insights: The systems’ analytical capability helps analyze vast amounts of data to identify trends, patterns, and opportunities. These insights can help plan sponsors and administrators make informed decisions about plans, investment options, and participant education.
- Cost reduction: By reducing errors and streamlining the processes, automating financial systems can lead to significant cost savings.
Automating Compliance Testing – A Congruent Case Study
A critical area in retirement plan administration that is significantly impacted by automation is Compliance Testing. It involves complex calculations and analysis to ensure the plan meets the regulatory requirements.
This case is an ideal example of how financial system automation helped a plan administrator overcome these challenges. Congruent successfully managed compliance testing for a leading US Retirement Plan Administrator serving many Fortune 500 providers, with AUM worth $200 million, serving almost 2 million participants.
The Challenges
The complexities were compounded by the complex nature of the retirement plan ecosystem and limited time availability for compliance testing. Here are some of the key compliance testing challenges that the client faced.
- Lack of domain knowledge: Their IT partner was a generalized provider without specific expertise in the retirement plan industry. This led to quality issues and missed deadlines, especially in Compliance Testing.
- Resource Constraints: The client faced an acute shortage of in-house qualified resources and was unable to handle the compliance testing workload additionally.
- Tight deadlines: The approaching compliance deadline created immense pressure, demanding quicker solutions.
- Scalability issues: Compliance testing poses an additional workload for the resource. To manage complex plans with varying requirements, the partner should be capable of scaling their operations for seasonal workloads.
These challenges highlighted the need for a specialized partner with deep domain expertise, proven processes, and the ability to deliver under tight deadlines.
Congruent’s Approach
By forming a dedicated 30-member team led by an SME (subject matter expert), Congruent tackled the client’s Compliance Testing Challenges.
Phase 1: Data collection and preparation
Comprehensive data collection to ensure all participants are eligible, which was then cleaned and prepared for analysis.
Phase 2: Benefit analysis
Calculation of average benefits for different employee categories (HCE, non-HCE, key employees, and non-key employees).
Phase 3: Compliance Testing
Conducting numerical non-discrimination testing such as ADP, ACP, and Top Heavy testing and providing recommendations for compliance.
Phase 4: Client Collaboration
Close partnership with the clients to ensure alignment with their specific requirements and successful compliance.
The Congruent Impact
Congruent achieved impeccable results with their well-trained resources, streamlined processes, and domain expertise.
- 100% on-time delivery
- 98.5% Accuracy
- 13.5% reduction in plan administration time
Building on the initial success of the initial project, Congruent has expanded its engagement with the client, taking on an additional 1500 plans.
What made this Achievable for Congruent?
● Domain expertise and industry focus
With over 18 years of focussed retirement industry experience, Congruent is an expert at the complex regulatory scenario and understanding client needs.
● Talent and development
A dedicated L&D team continuously trains professionals in compliance testing and retirement plan administration. Many employees are proficient in the field, and they hold industry certifications.
● Streamlined process and scalability
With such extensive experience, Congruent has developed fail-proof processes and systems to deliver high-quality compliance testing in a short period of time. The availability of experienced teams and subject matter experts provides the ability to scale teams up and down based on client requirements.
● Client-centric approach
With a strong emphasis on understanding the client’s requirements and delivering tailored solutions, the focus is building a close relationship with the client for assured outcomes.
Streamline Compliance Testing with Congruent
Automating financial systems is not a luxury anymore but a strategic imperative for plan administrators looking to succeed in today’s complex landscape. With the increased regulatory complexities and the amount of data, automation helps providers and administrators to improve efficiency, accuracy, and assure compliance. Are you struggling to meet compliance testing deadlines and accuracy? Contact Congruent to understand how we can help streamline processes.
