Introduction - Depository Trust & Clearing Corporation



Improving the Retirement Plans Business with Technology & StandardizationWhite PaperVersion 2.0 – January 29, 2014AcknowledgementsThis paper was a collaborative effort by members of the Retirement Plans Standardization Advisory Group.NAMEFIRMRobin GugelGreat WestNancy TrammellGreat WestAmber KellamGuardianZach DunkinINGGarry ChruschJohn HancockAndrea TrosperLincoln NationalRob HosierLincoln NationalGinny DeLuzioMass MutualMike MaxwellMass MutualChris SaggioNationwide JP MurphyNationwide - Group ChairMatt MyersNationwideNancy McFarlanePrincipalJeremy StephensonSammons Retirement SolutionsJeanann SmithDTCC Jon VolpeDTCC Lisa O'NeillDTCC Table of Contents TOC \o "1-3" \h \z \u 1Introduction PAGEREF _Toc377395694 \h 41.1Executive Summary PAGEREF _Toc377395695 \h 42Proposed New Process Overview PAGEREF _Toc377395696 \h 53Graphical Process Overview PAGEREF _Toc377395697 \h 54Naming Conventions and Definitions PAGEREF _Toc377395698 \h 55Business Data Points Inventory PAGEREF _Toc377395699 \h 6IntroductionThe purpose of this guide is to explain how DTCC’s products and services will solve the issues of increasing costs & support related to the Retirement Plans industry. Accompanying this guide are other related files. These include:Data Requirements & DefinitionsProposed Looping StructureDTCC Current Functionality DiagramExecutive SummaryPositioning Statement:Insurance Carriers are encountering increased technology & related expenses as the industry continues to support the expanding Retirement Plans (RP) business. Currently, there are multiple proprietary feeds being created by the Carriers within the RP business that are sent to several distributors.? These proprietary feeds in some cases combine positions, transactions, commission data and participant level data.? More importantly, these feeds are time consuming, labor intensive, require excessive maintenance & limit the time to market by the Carriers to support the Distribution partners for reporting, new products, etc.DTCC Insurance & Retirement Services (I&RS) at the request of its members created an Advisory Group (AG) consisting initially of insurance carriers to determine an industry-wide solution for the exchange of data for the RP business.? Why DTCC?Currently, I&RS offers a suite of streamlined processing and compliance-driven solutions for carriers and their distribution partners – broker dealers, banks, brokerage general agencies, independent broker dealers and other firms – through a secure, centralized and automated infrastructure. This infrastructure enables insurance carriers and distributors to exchange information at various points throughout the annuity and life insurance processing cycle. At present, there are no limitations in the data available for distributors in the annuity marketplace, but there is not a DTCC file type that can handle participant level data. It is for these reasons that the WG group feels that DTCC is the solution to automate & streamline the data needs for RP business.Creating a standardized, cost effective process for the RP business is at a critical point in order to allow the insurance carrier to grow & the distributors the ability to increase their competitive RP offerings. The RP marketplace is significant in terms of assets with the most recent data as of year-end 2012 provided by Cerulli Associates; the U.S. Retirement Markets report reports that the defined contribution assets will grow to an estimated $7.2 trillion by 2017 while the defined benefit assets are estimated to be $8.0 trillion by that same time period. This data includes both public and private plan assets. DTCC in conjunction with the AG members have the knowledge, expertise & tools to help close the gap in data needs for the RP business. The AG feels that there are a number of benefits to firms upon standardizing the data and files needed for the RP business including:Offering improved data coverage and reporting;Improving speed to market for firm data requests;Lowering cost to add additional firms in the future;Enhancing firm relationships;Offering external business partners the data reporting they need in a timely and cost effective matter;Streamlining processing by centralizing key data feed processes and capabilities;Reducing technical debt and risk via simplification of standard data feeds;Eliminating customer feeds that are time consuming, labor intensive and excessive maintenance;Heightening awareness of RP business and participant level information.Proposed New Process OverviewThe advisory group met to identify and clarify the issues. Initially, the group reviewed the current state of the exchange of RP data. This analysis included current proprietary data feeds, internal administrative systems, and requests for additional data for the RP business.The data elements were identified, then compared with the current DTCC files and the data gaps were uncovered. The primary focus was on the Positions data, but some discussion/overlap with Commissions & Financial Activity Reporting occurred. The product type codes utilized today on the DTCC Position and Valuations (POV) feed are PEN (pension) and RET (retirement). The codes are being defined as a Group Annuity (PEN) and Hybrid (Mutual Fund Retirement Account) as RET. A number of entities were defined as receivers of the RP details. Many of the data points may be different depending on the receiver of the data. Entities were defined but not limited to:Record KeepersThird Party AdministratorsDistribution PartnersPlan SponsorsParticipantsData AggregatorsThe advisory group is proposing to create a new, separate Positions (POV) file due to the number of differences within the looping structure and data points. The looping structure can be found in the proposed record layout template.At this juncture, the group intends to socialize with the defined entities to create a business case. Upon completion of this phase, the AG would like to create a full working group that is comprised of all interested parties. The full working group scope will finalize data elements, functional specs, and technical requirements. This will also include an implementation schedule and committed parties. Graphical Process OverviewThe current custom and proprietary model reflected below creates inefficiencies and time consuming processes for distributors and carriers. Distributor ADistributor CDistributor BTrading PartnerXTrading PartnerYTrading PartnerZThe proposed standardized data feed solution addresses the needs of both the insurance carriers and distributors by creating a central link and efficiencies. CarrierACarrierBCarrierCDTCCTrading PartnerXTrading PartnerYTrading PartnerZNaming Conventions and DefinitionsThis section defines terminology that is regularly used in the retirement plan industry. Producer – a producer means any person (individual, corporation, etc.) who or which is licensed to solicit, negotiate, or sell insurance. Agent – an individual or firm authorized to act on behalf of another (called the principal), such as by executing a transaction or selling and service an insurance policy. Financial Advisor - a person or organization employed by an individual or mutual fund to manage assets or provide investment advice. Also called investment advisor or investment counsel. Participant – employee that is participating in the retirement plan offered by their employer. Distributor – a financial services company that buys investments to resell to interested buyers/consumers. Also called a broker/dealer or brokerage firm.Broker – an individual or firm who acts as an intermediary between a buyer and seller, usual charging a commission. For securities and insurance products, a license is required.Data Aggregator – is a firm who gathers information expressed in a summary form, for purposes such as statistical analysis or platform of participant data.Plan Sponsor - a designated party, usually a company or employer, that sets up a retirement plan such as a 401(k) for the benefit of the organization’s employees. The responsibilities of the plan sponsor include determine membership parameters, investment choices, and in some cases, providing contribution payments in the form of cash and/or stock.Third Party Administrator – is a person or organization that processes claims and performs other administrative services in accordance with a service contract, usually in the field of employee benefits. More specifically, a TPA is neither the insurer (provider) nor the insured (provider) nor the insured (employees or plan participants), but handles the administration of the plan including processing, adjudication, and negotiation of claims, record-keeping, and maintenance of the plan. Record Keeper (record keeper) – is a person or organization that maintains the history of participant’s plan activities.Business Data Points InventoryThe data elements were reviewed and defined based on the plan and product/contract level. In addition, the elements are also reported at the participant level. The product/contract level data points included:Contract and Plan NumbersIRS Qualification CodeCUSIP NumberProduct typeContract statusContract plan valuesStable fund and investment fund values & detailsWhereas, the plan level data points defined were items such as:Plan Tax ID NumberName of PlanPlan 3-digit IdentifierPlan statusNumber of eligible, participating, and terminated participantsERISA indicatorDoes the plan allow company stock, self directed retirement accounts or loans?Plan Party Roles & DetailsSeveral data points were identified for reporting at the Participant level. They include:Participant IdentifiersFirst and Last NameParticipant details such as date of birth and participant plan statusStable fund and investment fund values & detailsFurther details of the data points and descriptions are available in the Data Requirements & Definitions document.Document Revision HistoryDateAuthorVersionChange Description1/10/2014Jeanann SmithLisa O’Neill1.0Initial Document1/22/2014Jeanann SmithLisa O’Neill2.0Modifications made based on feedback from Advisory: They include:Added wording regarding data needs to Section 1.1. Modified wording in the paragraph regarding the benefits to the firmsWordsmith the last paragraph in Section 2 – Proposed New Process FlowAdded Appendix 3 to the document regarding the DTCC Current Functionality Diagram ................
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