Is Your Retirement System Accurate?

How can retirement services companies, employers and employees be confident that a retirement system is accurately calculating employee eligibility, break in service (BIS) rules, vesting periods, contributions, employer match amounts, or profit sharing contributions? Assuming they know the answer to this question, auditors and plan administrators must also rest assured that their system complies with regulations and the plan documents are accurately implemented. And a plan administrator must be able to easily confirm that the system was compliant during a previous plan revision.

These requirements are often challenging, because from what I’ve seen working with large-scale customers, this logic is typically built with a rule methodology and then hard-coded into rule engines. The rules are often misinterpreted by programmers, resulting in business subject matter experts often being unable to describe how these rules determine business conclusions.  IT can try to help, but usually they can only explain the rules from a technology perspective, using technological terminology.

When errors occur, IT is the only resource that can explain (with significant effort) why the system calculated an employee’s eligibility, deductions or the employer’s match incorrectly.  And once again, oftentimes the system documentation can only be explained by a technical team member in a way that does not reflect the business’ core concerns.

Most retirement systems in production today were built using a rules methodology and then the rules are hard coded into the programs or into a rules execution engine.  The challenge with these systems is that they have a catalogue of rules and it is difficult, if not impossible, to know if:

  • They are complete
  • There are any conflicts, or missing rules
  • How the rules determine a result

An effective Business Decision Management System (BDMS) combined with The Decision Model is an ideal way to solve these issues. Retirement system decision models produced in this manner are easy for everyone to understand and can only be interpreted one way. The business can easily identify when the logic is complete and spot inconsistencies and errors.  Decisions can be tested before the models are given to IT and, with BDMS systems that can generate the business logic code, there is absolute confidence that the production retirement system is executing the logic exactly as modeled.  When issues surface, an analyst resource can typically determine the issue.  Additionally, logic can be updated without a software development cycle.

Enterprise Business Decision Management Systems version all the retirement system assets (business logic), so there is always a clear audit trail for the logic on a given date, including who changed the business logic and when.  Auditors and plan administrators can easily review the business logic at any time.  These types of systems can also:

  • Map the business logic to the plan documents, so the plan is traceable to the decisions and visa versa
  • Provide governance, so changes are never put into production without appropriate testing and approvals
  • Auto-generate executable code
  • Update production systems in a technology-independent fashion, without manually rewriting the logic

Typically, it is impractical to switch an entire existing retirement production system to a Business Decision Management System (BDMS) because of size and complexity.  However, these systems can be converted one decision at a time.  In other words, they can be transformed by dividing the retirement system into small independent pieces (Decisions), transitioning the system over a period of time rather than all at once.

It has been my experience that BDMS enables companies to rapidly respond to retirement regulatory changes and plan changes, resulting in retirement systems that are agile and more competitive.  I have also found that my clients are always amazed at how BDMS consistently results in simplified retirement systems.

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David Pedersen

David Pedersen is a senior enterprise architect with more than 20 years of experience in finance, technology and solutions development to orchestrate global infrastructure initiatives for financial, banking, insurance, healthcare and manufacturing industries. He leverages his experience to implement enterprise business architecture, BPM, BDM and system requirements. David is a leading authority on The Decision Model and an experienced operational decision architect.

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