Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 ESG Investing
    • 2023 Private Markets
Breadcrumb
  1. Home
  2. DEFINED CONTRIBUTION
June 17, 2013 01:00 AM

Bad data can derail plan sponsors

Mary Steigerwalt, Chief Operating Officer of RCP Solutions
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Mary Steigerwalt, Chief Operating Officer of RCP Solutions

    For plan executives, accurate data has always been vital for effective day-to-day operations. Yet, many fail to make data management a priority. With the recent industry shift toward programs to derisk the balance sheet in defined benefit plans and to limit risks and lower costs in defined contribution plans, clean data is more important than ever.

    Accurate data is absolutely crucial to the success of a complicated undertaking such as pension benefit cash-out or risk transfer. Before embarking on any major program to derisk the balance sheet or lower plan costs, executives should establish procedures to clean up and maintain accurate data, locate missing participants, fulfill routine management reporting requirements and create audit trails.

    The how and why of bad data

    Inaccurate data is a recurring issue for both DB and DC plan sponsors, and yet it is often ignored until it creates problems. Data can become outdated when plan participants change jobs, or experience changes in life status.

    Today's typical employee will change jobs numerous times throughout a career. Industries such as retail and hospitality are much more likely to have higher employee turnover rates because of a significant percentage of younger, more transient employees.

    Participants might not place a high priority on updating contact information in the midst of life transitions. And with younger workforces, actions associated with such plans seem too far in the future to require immediate attention.

    Yet, when participants fail to update their information, it doesn't remove the plan sponsors' fiduciary responsibility to maintain regular communications with them or mitigate the very real risk of fraud. We worked with one plan sponsor that discovered after a participant was deceased that a family member continued to receive and cash pension checks.

    DC plan sponsors can encounter similar instances of fraud. Any efforts by the plan sponsor to reclaim the funds would likely require legal action against the perpetrators, resulting in legal and administrative fees. Often in such cases, legal efforts are unsuccessful because perpetrators spend the funds before they are caught by authorities. With clean data, plan sponsors can avoid these and other issues.

    Failure to conduct routine data maintenance and management can raise regulatory red flags and affect your ability to fulfill routine communication requirements, such as regular statements, annual funding notices and summary annual reports. DB and DC plan sponsors often rely on outside resources such as their record keepers to maintain accurate participant data. Routinely, our clients come to us assured their plan providers have supplied accurate addresses, only to learn when mailings are returned that this is not the case.

    The longer you wait to update participant data, the more complicated it might become to resolve, especially in scenarios where the participant has died and you are now left to track down beneficiaries.

    Previously, plan sponsors could enlist the help of the Internal Revenue Service to communicate with missing participants about benefits or tax issues. For a relatively small fee, the IRS would search its database to locate the individuals, providing a reliable resource for current contact information. Last year, the IRS stopped this service. While the Social Security Administration has a similar service, it recently increased its fees to $35 per participant from $25 per participant.

    Traditionally, plan sponsors have focused on mortality because they realize cost savings when they can remove participants from the plan. Yet, missing participants and uncashed checks can result in significant expense in both fees and personnel costs year after year. More importantly, when implementing strategic programs such as lump-sum distributions and other alternatives, the quality of all the participants' data can make or break the success of your program.

    Know your participants

    Having accurate data and understanding the demographics of your participants can help DB plan sponsors design the best program to derisk the balance sheet. The average age and length of employment, current and future retirement statistics, participant gender and life expectancy are all key factors in determining the best long-term program. This is critical information when deciding how best to handle current and future retirees. While the emphasis is often on the retirees, the demographics of the population as a whole are just as critical when designing or selecting the right program — and ensuring its success.

    Demographics will impede or ensure the success of your efforts to communicate with participants. How do you communicate clearly and in the right way to elicit action or the desired response? Recently, RCP worked with a DC plan sponsor that had completed all communications requirements to notify participants about a pending rollover. One participant received the mailing, put the letter aside for later action and forgot about it. He found the notification two years later, long after the response deadline had passed.

    Providing participants with a variety of ways to respond — via mail, electronically or by phone — as well as providing call-center services to answer questions and provide more information can all contribute to an increased response rate. In the case mentioned above, perhaps a series of automated reminder calls would have helped ensure action on the participant's part.

    Leave a paper trail

    Once you've fulfilled the reporting and communication requirements, take the necessary steps to document your efforts. The process is not complete without comprehensive management reporting documents and an audit trail to prove that you fulfilled fiduciary and regulatory requirements. Participants have been known to file complaints, contending plan sponsors did not do everything possible to locate them, or did not act in the participants' best interests. These complaints can raise red flags with regulatory agencies and might lead to audits by the IRS or Department of Labor.

    Ready for action

    Whether your goal is to increase efficiency and decrease costs, or a larger strategic derisking initiative, take the steps to address these issues now. By taking action, you can avoid potential roadblocks and bumps and reduce risk on more than just the balance sheet — you can reduce the overall risk to your company.

    Ms. Steigerwalt is the chief operating officer of RCP Solutions, and a partner responsible for RCP's Retirement Plan Management Services group.

    Related Articles
    Driving successful participant retirement outcomes
    The good and bad of investment committees and boards
    Recommended for You
    Wayne Park
    John Hancock Retirement names new CEO
    Retirement Planning-main_i.jpg
    Americans less prepared for retirement amid financial uncertainty – Fidelity
    DC_East_2023_i.jpg
    Plan sponsors, managers mull merits of SECURE 2.0 provisions
    The Plan Sponsor's Guide to Pension Risk Transfer
    Sponsored Content: The Plan Sponsor's Guide to Pension Risk Transfer

    Reader Poll

    March 22, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    The Need for Speed in Trend-Following Strategies
    Global Fixed Income: Volatility and Uncertainty Here to Stay
    Morningstar Indexes' Annual ESG Risk/Return Analysis
    2023 Outlook: The Top Five Trends to Monitor in the Year Ahead
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 ESG Investing
      • 2023 Private Markets