BPI Detailed Process Descriptions – Examples

The following is a Detail Process Description report for a “Produce Benefits Statement” process. This example is from a BPI effort of a Financial Services Customer.

Produce benefit statements (process 1.0)

Context

The process subject to design was 'Annual Review'. The nature of the new process is such that an annual review no longer takes place in the same context as in the past. More regular processing of data and updating of records - as well as the separation of the production of annual statements from the preparation of annual accounts - has significantly changed this process. It has been re-named 'Produce Benefit Statements'.

The purpose of this process is to provide accurate and timely information to members on the various benefits they may be eligible to receive. The new process allows for benefit information to be provided to members at any point in time. A formal statement is provided annually to meet regulatory requirements.

Process outputs

The main output is a benefit statement for the member. When annual statements are issued, a schedule of benefits is sent to the employer and an insurance schedule is sent to the insurer.

Performance standards

F-Crop's performance standard for the production of annual statements for a fund is two weeks from the year end. One-off requests from individual members for benefit information will be provided at any time.

Major constraints

The main constraint on the process is that a statement must be formally provided annually to meet regulatory requirements. This statement must be in writing and must contain specific details set out under the regulations.

Pre-requisites

This new process has the following pre-requisites:

Information from the members and employer

The ability of F-CORP to conduct this process effectively and efficiently is dependent on the timeliness and completeness of information from the employer as well as, in some instances, the member. Specifically, the following information will be obtained on a monthly or pay frequency basis:

• Contribution information by member.
• Changes in membership details:

• Name, address, salary (where it can be easily obtained), category, status, date of birth,     date of employment and date joined fund for new members joining that month;
• Name, member identifier, date of exit and salary (if required and not updated regularly by employer) of members exiting that month, as well as reason for leaving;
• Name, member identifier and nature of change for all other existing members:
• changed salary;
• changed status and effective date;
• changed category and effective date;
• changed name; and/or
• changed address.

• Contribution cheque, which is banked and entered into F-Crop's accounting system.

Contribution and member information is conveyed from the employer in electronic format. There are three approaches for data transfer to F-CORP:

• The information is downloaded directly from the Customer's payroll system into F-Crop's     Administration System (the preferred option);
• The information is downloaded directly from the Customer's payroll system onto disk, and read into F-Crop's administration system;
• The information is obtained in paper format, and provided to a data house for electronic     conversion so that details are entered and verified.

All new members are loaded into the system when the member and contribution information is received (electronically) by F-CORP (or employer pay frequency) and provided with a unique member identifier that can either be system-generated by F-CORP or provided by the Customer in line with employee numbers the second being the preferred option.

Other information is collected from the new member by the employer on behalf of F-CORP. This information relates primarily to options for investment and insurance, including beneficiary details, but also to tax file number. Such information is transmitted to F-CORP in paper format because a signature may be required from the new member.

The employer gives a new member an information package containing a superannuation option selection form (SOS) when they take up employment. This form requests the new member to select investment and insurance options, where appropriate, and asks for a tax file number and for beneficiary nominations. A stamped, self-addressed envelope is also supplied for the information to be returned to F-CORP within the first week of employment. Information contained in returned forms is entered into F-Crop's Administration System. Any change request is effective from the date the request is received by F-CORP. Employees who do not return a superannuation option selection form are placed in default settings for benefit, investment and/or insurance options (which are defined in the contract with the employer), and given a subsequent opportunity within the first week of the first full month of employment to identify selections different from the defaults (see activity 1.2). Changes to these default settings requested by the member are effective from the date the request to change is received by F-CORP. These changes are not backdated. In the case of investment choice, monies might be transferred in line with the member's request effective from the date of receipt of the request.

To ensure that the required information is obtained from the employer, F-CORP has an 'implementation team' to assist Customers in technically providing the information. Additionally, F-CORP will provide:

• a standard data collection format;
• information packages for members as well as separate information packages for pay/personnel staff;
• training packages for pay/personnel staff;
• standard 'superannuation option selection forms' (see activity 1.2); and
• standard 'confirmation forms' (see activity 1.2).

Discussions (face-to-face, or via telephone) are conducted with the Customer after the information is received to discuss any issues arising from the data collection process.

The Customer contract

A contract is established with each Customer addressing key issues in the partnership, including performance standards, information requirements, and policy decisions. The latter sets out Trustee instructions on issues affecting member contribution and benefit eligibility (e.g., maternity leave).

General dependencies

The process is dependent on the following general assumptions:

• the administration and accounting systems will be fully integrated;
• ledger accounts will be broken down as reconciled and unreconciled;
• balance date financial statements are independent of benefit statements;
• year-to-date (YTD) figures for expenses deducted from the fund are available and updated monthly;
• an internal rate of return (IRR) is available for each investment product, investment choice     and each fund (on a monthly or quarterly basis); and
• the correct market value of each investment product is available monthly.

List of main functions

Eight main functions comprise the provision of benefit information:

1.1     Enter options, tax file number and/or beneficiary information;

1.2     Forward confirmation forms;

1.3     Enter changes requested by members;

1.4     Reconcile totals, notify employer of discrepancies and resolve (if required);

1.5     Calculate monthly crediting and margin rates;

1.6     Calculate deductions from member accounts and update balances;

1.7     Conduct quarterly Year-To Date (YTD) reconciliation; and

1.8     Calculate benefits and produce statements and schedules.

Description of main functions and activities within functions

1.1 Enter options, tax file number and/or beneficiary information

Options, tax file number and beneficiary details are received from the member, via the SOS form distributed by the employer at the start of employment (or prior to the first day of employment). This information is manually entered into F-Crop's administration system. In some cases it will be necessary to refrain from entering information until disk data on the new member has been received from the employer. If no SOS form is received from the member, default settings are used for option selection (if appropriate).

1.2 Forward confirmation forms

F-Crop's Administration System recognises new members (those with new member identifiers) and print a 'confirmation form' which is sent to these members. The confirmation form lists all the information received to date on the member including any roll-over details, sums insured and instructions and an indication if underwriting is required. If a SOS form has been received, the confirmation form will include selected options, tax file number, dependent nominations, death benefit information, underwriting requirements and roll-over information (if appropriate). If no SOS form has been received, the Confirmation form will contain blanks (for tax file number, dependent nominations, etc.) and default settings for option selections. New members will be asked to return the form if they wish to:

• change the options as selected for them by the default mechanism;
• change incorrect details;
• provide a tax file number; and/or
• provide beneficiary details.

The signed SOS form, with changes noted, is returned to F-CORP in a self-addressed envelope. In addition, a confirmation form could be sent periodically (e.g. at the 6th month) to all members to allow them to change their options or any other information, as per the contract.

1.3 Enter changes to member's options

New members may return the signed confirmation forms with requests for changes in investment, insurance and/or benefit options (i.e., different from the default setting). These changes are entered into the F-Crop's Administration System manually. If changes are required, a further confirmation form will be issued to the member once the F-CORP system has been updated.

Documentation and a cheque relating to a roll-over may be received at any time from either the member, employer or previous fund. The roll-over cheque and details from the previous fund, if applicable, is entered into the accounting and administration systems. This entry will trigger the production of either a confirmation form or other standard notification confirming the roll-over details with the member.

1.4 Reconcile totals, notify employer of discrepancies and resolve

Employee contribution information is received monthly or fortnightly - in line with payroll arrangements - from the employer for all employees. This information is obtained electronically (as described above) and resides in F-Crop's administration system. At the same time, the contribution cheque received from the employer is banked and entered into F-Crop's accounting system. If the cheque total in the Accounting System is different from the contribution total in the Administration System, the Administration System will produce an error report.

The employer is notified of the discrepancy, and F-CORP and the employer work together to reconcile the difference. The aim is to ensure that the discrepancy is corrected by the following month. If the cheque is lower than the total contribution amount by a serious margin (greater than X% difference) then exceptional action may need to be taken. However, given the data collection process described above, the likelihood of discrepancies is slim.

1.5 Calculate monthly crediting and margin rates

The F-CORP investment consulting group provides monthly rates of return for each investment product on the fifth day after the end of each month. These rates are posted to the Administration System automatically.

The percentage product allocation, including cash, is posted to the Administration System quarterly from the accounting system. There is a manual override for special circumstances, e.g. reallocation of monies to a new manager.

Using the monthly rates of return (from F-CORP Investment Consulting Group), and the product allocation percentage, the Administration System calculates the weighted rate of return to the month just ended. Cash rate is used for the period where the actual rate is unknown and from the date of exit. The system will automatically default to the cash rate in such instances. There will be no interim rate at any time.

A distribution formula (from the contract) is applied to arrive at the crediting rate and the margin rate. These are stored in the Administration System as stepped interest rates.

1.6 Calculate deductions from member accounts and update balances

Charges for tax, insurance, and other expenses are calculated and applied on a monthly basis. Changes are not applied on a prorata basis for periods less than a month. The monthly charge is based on a pre-defined value (e.g., 15% for tax) and is deducted from each member's account.

The contribution information, deductions information and the monthly crediting and margin rates (output from 1.5) form the inputs to update the account balance. This is an automated process.

1.7 Conduct quarterly year-to date (YTD) reconciliation

The internal rate of return for each investment product, choice and/or fund is calculated (automated) for the quarter. The IRR is used to calculate the YTD crediting rates and margin rate for the quarter. These YTD rates are compared to the crediting and margin rates previously calculated (in 1.5) and used (in 1.6) to update the account balances monthly.

An adjustment to the crediting rate for the current month (first month of new quarter) can be made if the difference between the YTD crediting rate (calculated using the IRR) and the applied crediting rate (calculated using the monthly weighted rate) for the quarter just ended is outside set tolerance limits.

The actual expenses incurred year to date are obtained from the financial accounts. This is compared to the charges deducted from member accounts (in 1.6) and from the margin rate (1.5). Adjustments are made to the distribution formula if required.

1.8 Calculate benefits and produce statements and schedules

This process encompasses the preparation and checking of template information, the testing of benefit calculations, the actual calculation of benefits and the production of statements for the member and schedules for other parties. A distinction is made at this point between 'annual' (mandatory) benefit statements and 'optional' benefit statements that may be requested by members at any time. The annual statements will likely include additional information, reflecting any legislative reporting requirements and will need to be distributed to all members. As such they will need to incorporate some degree of sample testing and control. The optional statements are one-off' and will be visually checked on production. There are no manual re-calculations. The template for the 'optional' statements will be the same as for exit statements.

1.8.1 Update and test templates (optional and annual statements)

The annual template is developed with the Trustees and it and the template for 'optional' statements reflected in the contract (i.e., at the start of the relationship). Templates, which can be customised for each fund, reside in the administration system, and cannot be changed unless required by new legislation, or requested by the Trustees. The templates are set-up in the Administration System by specialised resources, who also tests the templates during the set-up. These same resources will conduct any required updates (i.e., to reflect new legislative requirements). For the annual benefit statement, updates are conducted only once a year, near month 10.

1.8.2 Generate sample benefit statements in annual template (annual only)

A test file of sample members is generated automatically by the administration system, selecting members from various categories, status, ages etc., in order to obtain a representative test sample. Each fund has criteria set for the selection of test members. Some of the test cases will be selected randomly from the fund (e.g., new members, category changes), while others may be selected into the test sample on an individual basis (e.g., exceptions).

The size of the sample depends on the size and nature of the fund. Sample benefit statements are generated together with a supporting file of information.

1.8.3 Manually check sample benefit statements (annual only)

The template and the benefit statements are checked manually to ensure that they are accurate. The supporting file of information is used to facilitate and expedite the checking procedure.

1.8.4 Calculate benefits (optional and annual statements)

The templates are combined with the member account balances and benefit formulae in this function. The benefit calculation is automated, and can be produced as necessary.

1.8.5 Print and distribute statements and schedules

Statements for members are printed. This will either be done directly from the Administration System or via extra software, although the process is automated. Member statements are distributed via the employer in most instances.

When annual statements are issued, a schedule of benefits is sent to the employer and an insurance schedule is sent to the insurer.

Protection is only considered on an annual basis and upon exit, and only appears on the annual statement and exit statements. Options statements contain a note to reflect that protection has not been accounted for.

The member statement, employer schedule and insurance schedule are distributed. Although in-house printing and distribution facilities are required for both optional and annual statements, there is an option to use an external company for annual statements. In this case, the company is supplied with a disk containing all necessary format and benefit information.