Less than 30 years ago, defined contribution (DC) retirement plans were a rather novel retirement savings vehicle. Now, DC plans are the most popular employer-sponsored retirement plan in the United States, according to the American Benefits Counsel. Within the public sector, DC plans are playing an ever more increasing role in state and local retirement programs.
Public pension agencies are implementing DC plans in unique ways – some offer 457 and 403(b) plans while others are redesigning their traditional defined benefit (DB) plans into hybrid plans with a mandatory DB and DC component.
As public pension agencies adopt creative ways to ensure their members have sufficient retirement income, it is incumbent that software IT vendors use adaptive ways to help these agencies administer their DC plans.
For the last 13 years, Sagitec Solutions has been helping state and local pension agencies administer DC plans in addition to DB, Taft Hartley and provident fund plans. Sagitec’s clients have immense flexibility in how their DC plans are designed and managed within their Neospin™ pension administration solution (PAS). This underscores Sagitec’s fundamental approach to software delivery: design tailored solutions for each client’s unique needs and requirements. For instance, while more than a fourth of Sagitec’s state and local pension agency clients offer DC plans, no two clients are alike in terms of how they administer their DC plans within their Neospin™ solution.
The degree to which the pension agency is involved in the DC plan greatly impacts how the DC plan is designed within Neospin™. Some clients merely collect employee and employer (when applicable) contributions and then provide those funds to the respective financial institution. In this scenario, clients receive contributions through the employer reporting process, which often occurs via a web self-service portal. Once Neospin™ validates the DC contribution data, the contributions are sent to the financial institution using a secure file transfer protocol. For these clients with a low degree of DC plan involvement, they often require their members to contact the financial institution directly for account updates (e.g. contribution increases, beneficiary or address changes, among other requests).
In other cases, clients have a high degree of involvement in DC plans. For these clients, Sagitec designs Neospin™ with member self-service functionality in addition to handling the collection and disbursement of DC contributions. Using a member web portal, members can view their account balance and update contribution data, among other account maintenance activities.
DC plans offer many benefits to both public pension systems and their members. In terms of the former, they reduce long-term risks and costs. For the latter, DC plans are a great way to supplement retirement savings on a tax-deferred basis. Due to these benefits, it’s clear why “several experts predict a continuing trend toward increased reliance on a defined contribution plan component in the public sector to provide retirement income,” according to an industry report. Considering the supporting role that DC plans are increasingly playing in public pension funds across the country, it’s paramount that vendors take a unique and innovative approach to DC plan management.
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About Sagitec Solutions
Sagitec Solutions, LLC designs and delivers tailor-made pension, provident fund, unemployment insurance, and healthcare and life sciences software solutions to clients of all sizes. Understanding that a dynamic world requires dynamic technology, Sagitec offers solutions that are highly configurable and extensible by nature. With deep industry experience in software implementation and systems integration, project management, consulting, hosting and software support, Sagitec is a partner clients can trust to deliver mission-critical IT projects. Find further information by visiting www.Sagitec.com or by contacting Rick Deshler at (651) 335-3406 or at Rick.firstname.lastname@example.org.