By Sandra Sutton

Processing pension payments accurately and on time is a priority for most organizations despite being an administrative task that can sideline strategic pay and HR resources. That said, the responsibility for managing the paying of pensioners is only expected to grow. At present, Canadian organizations will process pension payments for more than 2.5 million retired employees, a number forecasted to increase by 3.4 per cent annually for the next two decades¹.

As baby boomers retire in droves, forward-thinking Canadian companies are searching for viable ways to keep their pension payments simple, economical and compliant—while allowing their pay and HR professionals to focus on core responsibilities and strategic objectives. Herein lies the case for separating pension payments from core payroll administration and processing and determining what to look for in an outsourced pension payments provider.

The Case for Separation
When you separate and delegate pension payroll administration and processing to a third-party there is a positive impact for both the organization and the pensioner. By removing the burden of managing two payrolls, companies can effectively streamline operations, stay compliant as payroll legislation evolves and ensure quality of service and payroll accuracy for pensioners.

An analysis of how much time a payroll team spends on pension payroll—from administering, processing, reporting and managing inquiries—reveals clear time and cost-savings gained through outsourcing. In fact, when pension payroll administration and processing is outsourced, pay departments gain an average of 31 minutes per pensioner per year².

Ultimately, separating and outsourcing managed pension payments keeps financials and reporting clean. With pension payroll costs independently tracked and reported, auditing and reporting is simplified. As a result, administrators can afford to spend more time servicing the needs of their company’s active employee base.

Outsourcing also allows companies to benefit from economies of scale. As more employees retire, organizations are able to rely on a predictable, fixed cost per pensioner.

Furthermore, when organizations factor in the IT time and expenses associated with maintaining technology in-house, adapting applications to support pension payment needs and evolving legislative requirements, the cost benefits of partnering with a pension payments partner become even more apparent.

Separating and outsourcing pension payroll administration and processing also delivers specific legal advantages. Outsourcing pension payments backed by compliance experts effectively relieves the worry and legwork of staying current with regulations and eliminates the burden of applying updates to existing processes—not to mention the legal risks associated with unintentional non-compliance.

Finally, outsourcing can help ensure that an organization’s pensioners receive reliable, dedicated service, access to information and immediate answers to their questions or concerns.

Key Questions for Prospective Partners
When analyzing prospective pension payments partners, there are several fundamental provisions to consider. Payroll and HR decision makers, in organizations large or small, should ask themselves the following questions:

1. Are the partner’s pension payroll administration and processing services backed with dedicated, seasoned experts and supported with Canadian-hosted technology that caters to the specific demands of pension payroll and legislative requirements?

2. Are the partner’s solutions and services easily scalable to any number of pensioners?

3. Does the partner provide flexible customer service to respond to the diverse demands of pensioners?

4. Does the partner’s solution provide mandatory management and key performance reports?

5. Does the partner provide management of year-end tax reporting services?

6. Does the partner provide cheques or direct deposits with statements?

7. Does the partner facilitate event communications from the plan sponsor to pensioner?

8. How will the partner ensure a seamless transition for pensioners when converting from an in-house to an outsourced solution?

Bottom Line: Fresh Focus
When pension payments are outsourced, payroll and HR teams can refocus on delivering exceptional employee customer service. With newfound time, company resources can concentrate on core payroll delivery, employee engagement programs, recruitment strategies and benefit offerings. Ultimately, outsourced pension payments help HR get back to business.

Sandra Sutton, director of corporate development at Ceridian Canada (www.ceridian.ca), is responsible for bringing innovative, in-demand products and services to the Canadian Human Capital Management market.
1 Source: Statistics Canada
2. Source: Ceridian Canada – Managed Pension Payments clients 2012/2013

(PeopleTalk Summer 2013)