Using Plan Data to Improve Features and Operations

In addition to facilitating administrative and fiduciary functions, retirement plan data can help plan administrators decide on value-added plan features and services.

So asserts a white paper from MassMutual’s Center for Behavioral Research. In the report, “Why Data Matters: Generating Value from Retirement Plan Data,” MassMutual points out that the value-added plan services include more actionable communications; targeted marketing of the retirement plan; streamlined data outsourcing; and more proactive, consultative Employee Retirement Income Security Act (ERISA) advisory services. These plan services can reduce a plan sponsor’s workload, increase plan understanding and participant engagement, and make it easier to meet fiduciary obligations.

“[A]bundant electronic records and robust analytical engines provide an opportunity for these providers, plan sponsors and intermediaries to gain fresh insight into retirement plans and participant behavior. And these insights pave the way for meaningful actions,” the report says.

MassMutual asserts plan sponsors can use targeted communications to spur participants into action. For example, to lead participants to better diversify their retirement plan assets, data can be used not only to target those participants with all of their assets in one investment, but also can target individuals based on the type of investments they have selected and their ages. Participants can then be provided clear steps to induce them to take action.

The report points out that plan data allows sponsors to monitor the effectiveness of plan features and participant communications and to fine-tune plan design or future communications. Data can also be viewed as a predictor of future plan activity, MassMutual suggests. For example, increased loan modeling by participants can predict the number of future loans from the plan.

The report notes that sponsors should use data not only from a recordkeeping system, but also from call center logs and participant Web sites.

Benefits of Data-gathering Systems

In its white paper, MassMutual asserts that allowing analytical systems to transform the immense quantities of plan data into actionable information allows plan sponsors, intermediaries, and providers to create value for participants not only through the addition of plan features and services, but by freeing up their time for more efficient use. For example, outsourcing salary deferral maintenance with a retirement plan provider frees a plan sponsor from collecting and maintaining deferral percentage change requests from individual participants.

Data-gathering systems also aid sponsors in their fiduciary functions. Summarization of data becomes information that can provide a framework for plan-level decisions, which “lends consistency to the decision-making process and also clarifies the future consequences of administrative and strategic actions,” the report says.

Sponsors can also use automated systems to track the ramifications of plan decisions, which can provide validation of a decision or allow fiduciaries to quickly diagnose and resolve any problems. According to the report, data allows fiduciaries to make decisions that take into account the majority of plan participants as opposed to a vocal minority.

The white paper, “Why Data Matters: Generating Value from Retirement Plan Data,” can be downloaded here.