Belgium’s SIGEDIS Compliance Program: Doing It the Smart Way Pension providers must seek efficient solutions for compliance to save costs and free up resources to pursue strategic initiatives.

Executive Summary To bring in transparency and protect the rights of the insured, the Belgian government created a legal body, SIGEDIS, to regulate employer-funded pensions. Typically, SIGEDIS mandates change on compliance declarations on a yearly milestone basis. All pension providers have to submit mandated declarations to SIGEDIS, for which they undertake multiyear legal IT projects to create the declarations.

The life insurance business is shrinking globally, and insurance companies face tremendous pressure to reduce costs and invest more on strategic initiatives to increase revenue. A multiyear compliancy program such as SIGEDIS consumes most of the IT budget, leaving little for strategic initiatives.

This white paper focuses on efficient ways to manage compliance so as to achieve a balance between legacy and strategic initiatives. With an efficient solution, and effective use of solution accelerators, a 20% to 30% reduction in IT cost is possible for a SIGEDIS compliance program.

Introduction to SIGEDIS Sociale Individuele Gegevens-Données Individu-elles Sociales (SIGEDIS) is a legal body to regulate

pension providers for second pillar pensions and bring transparency in the corresponding pension benefit statements sent to employees. It mandates that pension providers submit various types of information to prove compliance and to feed in information to the database used to create the employee pension benefit statements. This translates to a large-scale IT program for pension providers to manage the data.

The Belgian pension system is based on three pillars. The first pillar is the state pension financed by social security contributions and managed by public bodies. The second pillar comprises supplementary pensions provided by employers or “sectors” to their employees. The third pillar includes the additional pension programs that individuals can sign up for on their own. The state pension tends to be insufficient for indi-viduals’ post-retirement needs. This has made the second pillar popular; the tax benefit it offers has made it even more attractive. Typically, it is part of the employee’s remuneration package. Before SIGEDIS came into effect, it was difficult to retrieve a pension benefit statement for an employee since there was no centralized view. Employees would get multiple statements and found it difficult to assess their overall pension benefits (see Figure 1, next page).

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The Belgian government decided to create a supplementary pensions database in 2006 to collect information within Belgium and overseas for salaried employees, self-employed individuals and civil servants. The supplementary pensions database (DB2P) became operational on Jan. 1, 2011, with the aim of overseeing the tax and social security legislation on the second pillar. The database enables a consolidated view of an individual’s pension and can be used to verify compliance with laws such as the Loi sur les pensions complémentaires (LPC), Loi sur les pensions complémentaires pour indépendants (LPCI) or the 80% rule. It also brings transparency to supplementary pensions, providing a consolidated view of pension status via the www.mypension.be portal. Supplementary pensions are very important in the European context given the aging population. The database also provides accurate statistics on the second pillar, allowing individuals to better manage their post-retirement financial planning.

Pension Benefit Statement Scenario Pre-SIGEDIS

Figure 1

Benefit Statement

Benefit Statement

?

?

Benefit Statement

Benefit Statement

Benefit Statement

Benefit Statement

?

?

Benefit Statement

Benefit Statement

Benefit Statement

Benefit Statement

Source: www.sigedis.be

Pension Benefit Statement Scenario Post-SIGEDIS

Figure 2

Benefit Statement

State Finance

Source: www.sigedis.be

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A nonprofit organization, SIGEDIS was mandated to receive declarations from all second pillar pension providers to maintain the DB2P. These declarations include the type of pension commitment (group insurance, sector plan, etc.), the premiums paid by the employer, the pension fees of the insured, etc.

There are several events that can trigger SIGEDIS declarations (see Figure 4).

For all the events listed in the figure, declarations need to be sent to SIGEDIS. Insurance companies that offer second pillar pensions therefore need to adapt their IT applications to capture these events and then create corresponding declarations for SIGEDIS.

Overview of SIGEDIS and DB2P

Figure 3

SIGEDIS & Account State Declaration

SIGEDISSociale Individuele Gegevens

Données Individuelles Sociales

• Stores social data of individuals and ensures that publicinstitutions can use this data.

• Electronic archiving of employment agreement anddocument.

• Has maintained DB2P since 2011.

• Provides statistical artifact for planning and decision-making.

• Employers and companies can consult their data.

• Better control and transparency of supplementarypension/retirement benefits.

• Since 2016, beneficiaries can view their supplementarypension data.

DB2PData Bank for 2nd Pillar

Source: www.sigedis.be

SIGEDIS Declaration Events

Figure 4

Declarations Events

Create New Group Insurance

Modify Group Insurance

Renewal of Insured

Departure of Insured

Out-Transfer of Insured

Out-Transfer of Employer

In-Transfer of Insured

In-Transfer of Employer

Employer Premium Contribution

Insuree Premium Contribution

Source: www.sigedis.be

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Regulation Declaration

File Exchange History

Pension Providers SIGEDIS

Create Regulation Business Process

Create New Regulation

Errors

Information Extractions

Data Validation

Declaration Generation

Refusal Validations

File Traceability

File Security

Declaration Expedition

Regulation

Employer

Employer Agreement

Regulation Document

Instauration Procedure

How a Declaration Works

Figure 5

Figure 6 provides an overview of the interactions between different parties involved in a SIGEDIS decla-ration. It is a complex compliance project that demands deep domain understanding.

Social Security

Administration

BrokersFSMA

Fed. Admin Finance

Dormant(s)Employer

Rel. Employers Relation Insured

Unions

Company

Operations

Pension Institutions

Insured

Transferred

Consultation of DB2P www.mypension.be

SIGEDISONPONSS INASTIINAMI

DB2P

Interactions Between Different Parties Involved in a SIGEDIS Declaration

Figure 6

See Figure 5 for an illustration of how a typical declaration works.

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Several applicable laws, and the different types of pension, further complicate the calculation of amounts to be submitted to SIGEDIS (see Figure 7).

Different Types of Pension Contributions

Pension System with SIGEDIS Applicability

Figure 7

Legal Pension

Statutory

Public Private Independents

80% Rule

Contractors Salaried Business Head CXO

Physical Person

Group Pension Plan

Sectoral Pension Plan

Sectoral Pension Plan

Legal Pension

Legal PensionLegal Pension

Legal Pension

Group Pension Plan

Group Pension Plan

Individual Pension Plan (EIP)

Individual Pension Plan (EIP)

Enterprise Pension (ADE)

Individual Pension Plan (EIP) Complementary

Individual Pension Saving (PLCI)

Complementary Individual Pension

Saving (PLCI)

This requires a complex multiyear IT program to create declarations on key information related to second pillar pensions.

Key ChallengesTo comply with SIGEDIS directives, pension providers must send pension-related information in a specific format, and follow a specific schedule. However, there are several challenges for such a large-scale legal IT program:

• Compliance while keeping costs low: Given the slowing growth in the life insurance business, organi-zations have to rein in operating expenditures and invest in strategic initiatives to accelerate growth.Adherence to SIGEDIS eats into the budget for strategic initiatives.

• Compliance skillsets and localization: Since this compliancy program is limited to Belgium, there are few experts available to support the initiative. Multiyear programs such as SIGEDIS need a dedicatedpool of IT experts (business analysts, system analysts, developers, test analysts, project managers,architects, etc.) to retain knowledge and support implementation.

• Flexibility to adapt legacy mainframe applications: Most of the adaptations for SIGEDIS programsneed to be managed in legacy IT mainframe applications that are not built to support these require-ments. A deep understanding of the IT application landscape is needed to identify and implementcomplex changes within limited budgets and strict timelines. Requirements from SIGEDIS arriveiteratively, and the final declaration contains sensitive financial information such as premiums, tax,reserve, etc. This demands several rounds of verification and corrections internally before the datacan be sent.

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A Proposed Approach Given the time constraints of the regulations, the solution requires a rigid delivery model, in which the pension providers and their partners work closely and have a clear understanding of each other’s roles and responsibilities.

A Proposed Approach to SIGEDIS Compliance

Figure 8

Objectives ApproachKey Success Factors

• Be compliant with theSIGEDIS regulationsfor life ins. domain.

• Manage the workloadin an efficient andcost-effective way.

• Independentownership of E2Emodel by leveraging &increasing SIGEDISknowledge.

• Deep collaborationwith business toensure completecoverage.

• A proven deliveryapproach based on priorexperience in other lifeins. engagements.

• Iterativeimplementation.

• Leverage in-house toolsand acceleratorswherever possible.

• An efficient yetcost-effective approach.

PerformingUp in

‘V-Model’

StrongKnowledge

Management

RobustImpact

Analysis,Change

Management

ProvenTrack

Record onSIGEDIS forFive Years

PriorExperience

of ManagingE2E

LocalProfile

Key Elements of the Proposed Solution

Figure 9

1 2 3 4 5

Compliant with Lower Cost

By giving E2E responsibility, cost will reduce drastically (~30%) without compromis-ing on quality.

Localization

Local language speaking profile to better engage with business stakeholder and bridge the gap on Belgian context.

Knowledge Management

Wiki-based KMDB framework to retain and nurture knowledge. On-boarding and induction knowledge transfer package to have smooth, quick on-boarding to manage peak workloads.

Specialized Compliancy Skillset

Localization complemented by strong core delivery team at offshore will enable a dual mandate to get Belgian context and optimizations. Wiki-based KMDB will support knowledge retention.

Complexity of Adapting Legacy

Strong technical expertise at core team supported by technology CoE will enable a robust Impact analysis and change management.

• SLA based quality Service.

• 20-30% lesscost.

With effective deployment of solution levers with a global partner, up to 30% cost savings can be realized as compared with doing everything in house. Figure 10 (next page) provides an illustration.

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Illustration of Savings

Business Case

Annual Workload Distribution Annual Cost Comparision

Global Delivery Partner - Effort Distribution Efficient Operating Model for SIGEDIS ProgramIllustrative Example on Cost Savings

Figure 10

√ Assumptions: Annual Workload of 3,000 days.

√ Target operating model with global partner with a mix of local profiles for crucial roles like business analyst where language and local Belgian context is mandatory and onsite/offshore profiles to have efficient yet cost-effective solutions.

√ Core delivery engine will be managed offshore or near-shore to provide cost arbitrage.

√ Model is customizable.

Business Analysts

System Analysts

Developers

Testers

Project Management

Local

Onsite

Offshore

600; 20%

600; 20%

1665; 56%

630; 21%

705; 23%

900; 30%

450; 15%

450; 15%-30%

ProjectManagement

Testers

Developers

System Analysts

Business Analysts

100.000 € 400.000 € 700.000 €

Global Partner (including VAT) AS-IS

After successful deployment of the solution levers, more savings can be realized by focusing on further improvements.

The Way AheadAfter achieving compliance with SIGEDIS directives, further improvements can be realized by investing in automation, optimization and removal of redundancies. Automation of the test suite or a new way of working with the Lean model will make the IT program even more efficient.

Future Improvements

Figure 11Source: Cognizant

Automation

Optimization

Optimization of Team, Process, Technology

Optimization and continuous improve-ment on team structure, mix, onshore/offshore mix, process and technology to gain further benefit to reduce costs.

Remove Wastage

Remove the process steps that do not add value or are redundant to optimize the cost.

Automations to Improve Quality and Reduce Cost

• Automations of regression suite.

• Automations of ST & UAT suite.

• Automations of manual processes.

Remove Redundancy

Pension organizations can also consider a global delivery model by ceding end-to-end ownership of the SIGEDIS program to a partner. This will enable the core internal team to focus on strategic initiatives while saving costs.

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About CognizantCognizant (NASDAQ-100: CTSH) is one of the world’s leading professional services companies, transforming clients’ business, operating and technology models for the digital era. Our unique industry-based, consultative approach helps clients envision, build and run more innovative and efficient businesses. Headquartered in the U.S., Cognizant is ranked 230 on the Fortune 500 and is consistently listed among the most admired companies in the world. Learn how Cognizant helps clients lead with digital at www.cognizant.com or follow us @Cognizant.

About the AuthorSanjib Goswami is a Manager within Cognizant’s Continental Europe Insurance business unit. He has more than 12 years of experience in life insurance software development and global services. Sanjib has been working for a leading European insurance customer for more than eight years on life insurance product management, product business support, business transformation and IT strategy. He holds an engineering degree from Jadavpur University, India. Sanjib can be reached at Sanjib.Goswami@cognizant.com.

AcknowledgmentThe author would like to thank Martin Havelka, Senior Manager – Consulting at Cognizant, for his support and guidance.

References

• www.sigedis.be

• www.socialsecurity.be

• www.db2p.be

• www.eb-connect.be

• mypension.onprvp.fgov.be

• www.assuralia.be

• www.fsma.be