New HRMS challenge: section 89 in 1989 - human resource management system - IRS Section 89 - includes related articles on 'how the government created HR systems' and 'testing for section 89 compliance'

Software Magazine, Jan, 1989 by John E. Spirig

"But the other component is strategic," Manry continued. "What do you do when a benefit plan fails the tests? What are your options, and how much will each cost your employees, the company, or your ability to recruit and retain the human resources you need to run the business? This law is going to be a boon to benefits consultants."

Already, some major employers have put Section 89 compliance in the hands of their benefits consultants, according to Gerard Murray, director of benefits at The BOC Group Inc., Montvale, N.J.

"Our benefit consultants are well-advanced on this thing. They have their package together, and it would be silly for us to reinvent the wheel," Murray said. "We'll get a list of data requirements from them, they'll do the testing, and together we'll make any choices that have to be made." This approach also helps resolve the uncertainties of government requirements and questions about the best approach to compliance.

Most vendors with Section 89 capabilities suggest the use of benefit consultants to decide what to do with test results. "We will put the tools in your hands to make the best decisions, with your benefit consultants, on the costs and alternatives to compliance," says InSci's Knapp.

While detailed compliance regulations remain to be explained by the IRS, the general thrust of Section 89 and its non-discrimination testing requirements appear certain to have the following impacts on:

* employers without an automated personnel information system; the new regulatory requirements may provide the impetus for developing an in-house system or acquiring a package to handle benefits administration and other chores;

* employers with separate HRMS and payroll systems; the data requirements of the new law provide a reason to look at systems integration or improved interfacing software, since data from both systems is required for testing and analysis;

* do-it-yourself-minded companies and third-party administrators who take advantage of anticipated new consulting demands. Standalone Section 89 software may be the answer providing the issue of initial data collection to feed this software can be resolved; and

* for all employers; the choices made in 1989 should consider long-term systems and functional needs. The new tests are not a one-shot requirement but must be applied to each plan year from now on.

But for many HRMS software developers, however, it is still "too early to tell" what the new rules will mean in terms of either specific systems enhancements or new software. "Some of these rules are still in question," says Comshare's Manry, "and we expect there will be further clarification."