Attachment_13_-_Business_and_Process_Background.pdf

Attachment 5 Business and Process Background

OBA ORGANIZATIONAL STRUCTURE AND ROLES

Processing Divisions within OBA provide for three primary categories of federal employees across divisions:

1. Auditors gather and audit all data necessary for Benefit Determinations. The data include participant data, plan documents, and information on plan assets. Auditors have primary responsibility for auditing the Participant Database. In addition, they are involved in the Benefit Determination segment of the business process until the audits are completed and they have made the information available to the assigned Actuary to calculate benefits.

2. Actuaries analyze the plan documents and participant data. Actuaries program the valuation software to calculate plan benefits, adjust benefits in excess of PBGC limitations, prepare the plan valuation and associated reports, and produce the final Benefit Determinations. They also provide support in the appeals process.

3. Employee Benefit Law Specialists (EBLSs) and their contractor counterparts at the Field Benefits Administration (FBA) and Post Valuation Administration (PVA) offices carry out all the functions in the Benefit Administration segment of the business process. They also support the Benefit Determination segment by building the Participant Database with direction from the Auditor.

OBA Support Divisions

1. In the Technology/Risk Management Division (TRMD), Data Experts and their contractor counterpart Data Specialists support Auditors, Actuaries, Pension Analysts (PAs), FBAs, and PVAs in the areas of data acquisition, building the Participant Database and using the benefit calculation software. Business User Representatives liaise between software users throughout OBA and personnel in OIT.

2. The Policy and Procedures Division (PPD) conducts reviews and analyses of insurance operations and benefit payment matters, and provides operational input in the development of corporate policy, regulations, and legislative changes. PPD maintains the OBA Operating Policy Manual.

3. The Management Compliance Division (MCD) plans, organizes, coordinates, implements, and oversees OBA staff activities involved in key management areas, which include audit/review response, budgeting, management controls, quality assurance, management improvement, performance management, and strategic planning.

OBA BUSINESS PROCESS

OBA has two business processes related to the management of trusteed plans: (1) Benefit Determination and (2) Benefit Administration.

Benefit Administration functions ensure that participants’ day-to-day needs are met through the following activities:

1. Initial pension payroll setup

2. Estimated adjustment of benefits in pay-status in excess of PBGC limitations

3. Pension payroll

4. Address changes

5. Beneficiary changes

6. Benefit application and initiation of estimated benefit payments

7. Communication of final Benefit Determinations and adjustment of benefit amounts accordingly

8. Benefit application and initiation of the payment of final benefits to new retirees

9. Answering participant questions

Benefit Determination, calculating the pension benefits, involves four primary inputs:

1. Current and historical pension plan provisions, some of which may be missing

2. Current and historical participant data, which is often incomplete necessitating the use of estimated data or data that have not been verified

3. Plan assets and recoveries

4. PBGC regulations, practices and policies that govern how benefits are calculated under ERISA and the Pension Protection Act (PPA)

OBA uses these inputs for the following purposes:

1. Calculating estimated benefits for (1) newly eligible retirees and (2) retirees already in pay status, who are receiving benefits in excess of the PBGC limitations. For larger plans, Actuaries create a Benefit Estimation Tool (BET) for the administration staff to calculate these estimates.

If a BET is not available, Actuaries do these estimates manually.

2. Valuing the Plan - OBA calculates the PBGC total liability for the plan after calculating final benefits at the individual level using the Date of Plan Termination (DOPT) and PBGC’s actuarial assumptions.

3. Producing Benefit Determinations (BDs), which inform each participant or beneficiary of his/her PBGC benefit. OBA currently completes BDs in the two to six month period after finalizing the plan valuation for all but the largest of plans.

4. Re-calculating Retirement Benefits - After the Actuary finalizes the plan valuation, the recalculation tool (Actuarial Calculation Toolkit (ACT)) allows administrative staff to calculate retirement benefits for deferred participants at any requested retirement date.

Existing PBGC Benefit Calculation Processes

Legacy BCV is a suite of applications developed within and owned by PBGC. Calculations are done employing plan-specific Excel formulas that use both hard-coded PBGC-specific Excel add-ins and standard Excel functions and operators. Both input and output data are stored in plan-specific password-protected Access databases (input/output data are two MS Access databases with standard structures that are slightly different) located in the user’s drive on the PBGC network.

Processing a plan in Legacy BCV involves the following steps:

1. The Actuary identifies data elements described in the plan documents (“Raw Data”).

2. The Auditor collects and consolidates the raw data, using a custom database building tool (Leo), into a Microsoft (MS) Access database (the “External Database”). For complex situations, a Data Specialist assists the Auditor.

3. The Auditor oversees manual data entry into the External Database for data available only on paper and later audits the completed database.

4. The data team performs a reconciliation with the payment system, Spectrum, to ensure that the External Database and the PBGC Enterprise Database agree as to the plan population and basic participant data. In addition, the team performs data validations on the External Database to identify problem data.

5. The External Database is loaded into MS Access (the Valuation Database) using Leo, the Valuation Database Construction Tool.

6. The Actuary uses standard Excel functions and operators as well as PBGC-specific add-ins to perform the benefits calculations and to estimate (using standardized PBGC estimation techniques) or otherwise accommodate missing data. The results are stored in the Valuation Database.

7. The Actuary analyzes and reviews the calculation results using customized plan-specific reports designed by the Actuary. The Actuary resolves remaining participant data problems and documents them.

8. The Actuary performs a final reconciliation with Spectrum to ensure that the Valuation Database and the Enterprise Database agree as to the plan population and basic participant data.

9. The Actuary develops a Benefit Statement and Benefit Recalculation program for each plan that utilizes the same Excel spreadsheet and database developed for calculating valuation results.

The program is used to generate benefit statements that are part of the BD package and is also used by Benefit Administration staff to calculate benefits at actual retirement for participants still deferred when the valuation is finished.

10. Actuaries review and approve the results of the benefit calculations and the plan-specific software developed in #9 and document them in the comprehensive Actuarial Case Report (a.k.a. “blue book”).

11. TRMD archives (Archived Plans) the software so it is available to Benefit Administration staff (EBLSs, FBAs, and PVAs) and loads a small subset of the Valuation Database into the PBGC Enterprise Database, using the Automated Data Transfer (ADT) process.