Pension administration is the process of managing a retirement benefits plan associated with a company, organization, or government program. Such plans rely on the judicious investment of deposited funds to build up enough money to pay out benefits to retirees while accruing more funds from individuals currently paying into the plan. Regulatory agencies may set strict policies for parties in charge of pension administration to make sure plans are administered appropriately and fairly.
One aspect of pension administration involves periodically testing the plan to make sure it meets government standards. This can include calling for outside audits, making sure all investments conform with standards, and checking to see if any aspect of the plan violates the law. Pension administrators also want to avoid situations where benefits are being paid out at a rate so high that the plan is not rebuilding itself, as this could mean that current payers into the plan might not be able to access benefits when they retire.
Servicing a retirement plan can be a full-time job for a large plan, and it requires substantial financial acumen. Many companies put financial advisers and consultants in charge rather than trying to manage their own plans, as these professionals will be more qualified and also keep up with regulatory changes and other issues that might affect pension administration. They can also adapt quickly to changing market conditions, as they are more aware of emerging trends in the market because of the nature of their work.
The pension administrator can perform tasks like estimating benefits payments, sending out notices to provide information about the plan, and responding to requests for specific information about the plan. Many rely on pension administration software for this task. The software can track contributions and estimated payouts, provide projections about growth, and issue alerts and warnings when the plan does not appear to be keeping pace with the needs of the parties paying into it, indicating the need for a shift in investment strategies or pension policies.
Pension plans receive special tax benefits under the law, as long as they adhere to set guidelines. One concern of pension administration is to make sure the plan still qualifies for these exemptions, to protect both the plan and its beneficiaries. If the plan is no longer eligible for tax exemptions, this will have an adverse impact on payouts and could lead to problems in the future.