Technology marches on

Benefit plan sponsors and members can look forward to increased efficiencies and service levels

Technology has long piqued the interest of pension and benefits plan administrators because it improves the level of service and enhances understanding of offerings.

There are various types of technologies available to assist with plan administration. The option an organization chooses will depend on its objectives.

The three options

There are three basic technology solutions available to facilitate plan administration, each with pros and cons. They are:

Enterprise resource planning (ERP) software: This solution runs off a single software platform so that various departments within the organization can share information more easily and communicate with each other. An ERP solution typically offers limited functionality relative to specialty or “best-of-breed” solutions, and plan administrators are tied to the enterprise’s single vendor. That can be limiting and cause competition between departments for for resources and priorities.

“Best-of-breed” solution: Benefit plan administrators can pick and choose the software that works best for their various applications. If the solution supports extensible markup language (XML) technology, HR software packages from a variety of providers can speak to one another without the need for scheduled or batch updates. These different software solutions can share one central database of HR information and facilitate aggregated reporting from across all sources. If properly installed so that all applications are integrated, the best-of-breed solution can be efficient and offer the best functionality for benefits administration. One of the challenges for organizations is ensuring the various software applications are upgraded and continue to work together.

Outsourcing: If an organization wants to pass along the cost and trouble of ensuring technology is upgraded and integrated, it can outsource some or all of its HR functions, including pension and benefits administration. It can even parcel out only some of the administrative tasks within an HR function in a co-sourced arrangement so that, for example, the organization continues to handle participant inquiries arising from its benefit or pension plan. The challenge for benefit plan administrators is to find an outsourcing partner that is accurate, reliable and secure, so that they feel comfortable handing over control of data to an outsider.

Making the decision

Cost is a factor when deciding which solution to choose. An outsourced solution is probably not feasible for an organization with less than 1,000 plan members, at least as far as pensions and benefits is concerned.

Conversely, for plans with a large number of members, it may be the solution that makes the most sense. Complexity is a consideration. For example, if a plan sponsor offers a flexible benefits plan, outsourcing may be the technological solution of choice, given the complex administration involved.

But assuming cost, size and complexity are essentially neutral in the equation, the decision-making process involved in selecting one of these options will depend on the organization’s sourcing strategy. If it subscribes to the philosophy that all activities that don’t pertain to its core competencies should be administered externally, freeing its HR professionals to focus on strategic activities related to its core competencies, then the organization is likely to look to an outsourced solution.

Improving service levels

The objective of using any technology is to streamline operations and improve cost effectiveness for the delivery of the service. Delivery of benefits services is no different. Here are some of the ways to improve service levels for pension and benefits:

Employee self service: The move to self service is one of the biggest trends. As more plan members become web savvy and have access to a computer and the Internet at home, being able to offer them round-the-clock information has become important. That service is now frequently extended to the ability to update personal information and even to make benefit selections online.

HR personnel generally have to go to considerable effort to ensure plan members feel comfortable with the technology used in an initial online enrolment to ensure its success. But organizations are often able to achieve close to 100 per cent enrolment in the first year of an online effort. This usually requires a targeted communication and education campaign launched well in advance of the enrolment period and continued right through until the deadline.

While considerable hand-holding is typically involved, this is a worthwhile effort. Benefit plan members are increasingly more comfortable with online processes and are more self-sufficient.

Communicating through the intranet: An increased focus on plan member education with respect to pension investment decisions has resulted in plan administrators looking to the corporate intranet to ensure clear, consistent information is available.

Accessing information online: Benefit plan administrators are discovering how the Internet can be used to enhance members’ appreciation of pensions and benefits programs as part of their total compensation package.

One organization had, until recently, always used paper statements to communicate compensation information to its employees, including the various benefit programs it offered. The paper statements were cumbersome and costly, and did little to enhance employees’ appreciation of these plans. The company switched to an online total compensation statement, ensuring that it was attractive, easy to navigate and contained useful information.

Employees are now able to access base pay, incentive compensation and company and government benefit values, as well as a pension plan summary that can be printed for an employee’s records. To further encourage financial awareness, the company made all its retirement plan summaries available on the site, along with links to more detailed information.

That company surveyed its employees and, after the first year of using online statements, 90 per cent of respondents said they felt they had a better understanding of their total compensation, while the company realized a 20-per-cent reduction in statement costs.

Jeff Koven leads product strategy for Hewitt Associates’ eCyborg HRMS solution. For more information, contact [email protected] or visit www.cyborg.com.

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