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Benefits Administration: Definition, Benefits and Process

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    Benefits administration is the process of evaluating, selecting, creating, managing and enrolling employers into an organization’s benefits program. Both the benefits and the enrollment experience can heavily influence employee well-being, satisfaction and retention. Read how benefits administration works, what phases make it up and why employers everywhere should prioritize competitive offerings.

    Offering employer-sponsored perks doesn’t capture the full story of a company’s benefits program. Following design and implementation, strategy transforms into action through benefits administration.

    Benefits administration is made up of the tools, processes, resources and support offered before, during and after a company’s open enrollment. Employers must manage these benefits smoothly to avoid:

    • disruptions
    • lapses in coverage
    • frustrated employees
    • and compliance issues

    To help you understand the process and enhance your company’s approach, let’s explore what benefits administration is and how to manage it efficiently and effectively.

    What is benefits administration?

    Benefits administration is the process of evaluating, selecting, creating, managing and enrolling employees into an organization’s benefits program. Proper benefits administration ensures coverage doesn’t lapse. While HR typically handles administering benefits, the department also strategically supports executives choosing which options to offer. And HR pros help employees understand their selections and the differences in coverage.

    Managing employee benefits effectively requires benefits administration software and payroll tech to work in harmony. A benefits program’s success depends on timely, accurate and compliant administration. Using the right HR software can streamline processes, reduce errors and ensure a seamless experience for everyone involved.

    What benefits do companies administer?

    Employers provide anything from group health care coverage to fringe benefits, paid time off (PTO) and beyond. No two companies offer the same benefits, but common options include:

    • health care coverage
    • life insurance
    • retirement plans
    • and more

    Let’s discuss some of the common benefits offered by employers and when these selections can change.

    Open enrollment

    Open enrollment refers to the period when employees can decide to choose from the benefits their employers offer for the upcoming year. They are generally categorized into “open” and “locked” benefits.

    Locked benefits

    Locked benefits are those that an employee doesn’t have the choice to change outside the enrollment period once they’re selected; you can only amend them during the next year’s open enrollment period.

    Here are a few examples of locked benefits:

    • health insurance
    • dental and vision insurance
    • flexible spending accounts

    Keep in mind that certain qualifying life events, such as the birth of a child or adoption, may allow an employee to enroll in or otherwise modify a locked benefit.

    Open benefits

    Open benefits allow employees to enroll or change them outside the open enrollment period. Managing open benefits can prove challenging without a single HR software that allows employees to easily enroll in benefits, communicate details directly to a carrier and seamlessly transmit benefits data to payroll and every other relevant area.

    Some examples of open benefits may include:

    • short- and long-term disability insurance
    • pensions and retirement plans
    • health savings accounts

    Administering benefits during open enrollment

    Between managing open enrollment, ensuring participation of all employees and updating everything before deadlines, the process can be a complicated tangle to unwind.

    Employers should invest in the right benefits administration tech to simplify and enhance open enrollment. Consider software that offers self-guided enrollment for employees, even on their phones. It should also provide visibility into:

    • available plan options
    • contribution rates
    • how choosing one plan over the other will affect employees’ paychecks

    The ideal tech should help HR easily generate reports to show the progression of open enrollment and also send automatic reminders to employees who still need to make their selections.

    Leave benefits

    Leave benefits — the different forms of time off employees can earn — can give employers a competitive edge in recruiting. And in certain states, time off is a legal requirement.

    Certain states and municipalities have their own requirements for how employees must accrue, roll over, use and receive a payout of protected leave. Many PTO laws also require employers to show employees their current paid leave balances on their pay statements. HR also has a responsibility to ensure fair and consistent processes for awarding and administering leave benefits while preventing overuse.

    Automated HR tech is indispensable to simplify critical leave benefit administration tasks. The right software also helps support compliance by reducing human error.

    Common leave benefits include:

    • PTO
    • vacation
    • sick and safe leave
    • paid family leave/parental leave
    • family medical leave (aka “FMLA leave”)
    • disability leave
    • sabbatical leave
    • military leave

    Tuition reimbursement

    Tuition reimbursement benefits make it easier for the employee to manage college and trade school expenses. The IRS allows employers to provide up to $5,250 in tax-free tuition assistance per employee each year. It’s important to document any tuition reimbursement to avoid miscalculations and overpaying employees.

    Additional benefits and perks

    In addition to the benefits mentioned above, many employers offer other unconventional benefits to help attract and retain talent. Some of these include:

    • local discounts
    • wellness and fitness programs
    • meal allowance, reimbursement or free food on-site
    • transportation allowance, company vehicle use or mileage reimbursement

    Employers should ensure that the tax implications of any benefit with a cash value are appropriately conveyed to the IRS.

    What is the benefits administration process life cycle?

    Benefits administration requires careful planning and execution to ensure all the plans offered comply with local, state and federal law. Think of benefit administration as a life cycle that requires continuous engagement to be successful. It involves:

    • collecting and analyzing employee feedback
    • checking compliance requirements
    • selecting the right benefits
    • planning rollout, execution and administration

    Collecting and analyzing employee feedback

    For benefits administration to be seamless and effective, it’s important to know what your employees really need. You should always gather feedback from employees using surveys and questionnaires before making a final selection.

    The surveys should help you reliably find:

    • the types of plans and benefits employees want
    • how many dependents they might have
    • what benefits are most important to them
    • more, depending on your workforce’s needs

    Collecting feedback can be a heavy administrative task. Consider intuitive survey software to help lighten your burden and review feedback in different forms like graphs and charts.

    After collecting the feedback, data should be analyzed to determine the most desirable options and how that might affect plan pricing.

    Checking compliance requirements

    Once you have a data-backed view of what the employees need and want for benefits, it is time to check if the top-picked plans meet compliance requirements. Employers need to abide by state and federal requirements based on factors such as employee location and local employee head count when offering specific benefits. Consult a licensed legal professional if you’re uncertain about how a specific law impacts your benefits administration.

    Compliance requirements can slip easily through the cracks without the right tools and strategy, which can then leave a company open to potential penalties. Consider using government and compliance tech to help keep regulations in check, streamline processes and reduce human error with automated reminders and alerts.

    Selecting the right benefits

    After reviewing compliance requirements, it is finally time for you to choose your specific benefit offerings. But again, it is not as simple as it seems. Once you have a solid understanding of the types of benefits you want to offer, you should request proposals from multiple carriers and compare the cost and value of each option.

    Some vendors may have extra fees associated with administering plans, plan assets or per-employee enrollment. Always keep your organization’s strategic goals and the needs of your specific employee population at the forefront of your decision-making.

    Planning rollout, execution and administration

    Once you finalize benefits and vendors, it’s time to roll out the plan to your employees. Your plan should provide employees with a:

    • clear understanding and view of the offered benefits
    • breakdown of how their selection will affect their pay
    • resource explaining the enrollment period, process and deadlines so they can make the best choice possible

    An important factor to consider here is how you communicate the plans to your employees. Starting communications at least one month ahead of open enrollment allows time for informational webinars and important reminders. It’s crucial to be clear and concise when describing the plans, per paycheck deductions, company contributions, deadlines and differences between open and locked benefits. This ensures employees know what changes they can and cannot make outside the enrollment period.

    Supplemental material like handouts, slide decks, email campaigns and verbal announcements at in-person meetings may also help boost employee knowledge and preempt questions. This should include an overview of your company’s online enrollment tool. Include links, login instructions, screenshots — anything that might help people easily enroll.

    Administering benefits

    Once the plan is successfully rolled out and communicated to the employees, the most crucial part of the administration process begins. Open enrollment periods usually last for one to two weeks. You must ensure all employees have made their selections or waived coverage before your specific deadline. Anticipate employee questions around:

    • costs
    • plan coverage
    • what plan is right for them
    • unique situations
    • and more

    The team responsible for benefits administration (typically HR) should be ready to educate employees and answer questions. To make employees feel prioritized and instill confidence in your business’s offerings, set up individual times with them to walk through the available plans. This will help them identify what’s best for them.

    Many companies have a benefits coordinator or adviser who can ensure that the right information is relayed to the carriers based on employee selections. This individual may also partner with payroll administrators to ensure consistency and mutual understanding.

    Ideally, your HR tech will account for HR and payroll in a single software. By automating routine tasks, you can eliminate unnecessary reentry of critical employee, enrollment and deduction information.

    Offering regular updates and training

    Consistent and regular updates and training sessions are important to help employees stay informed about benefits and how benefits administration works. Ultimately, these updates and training help employees understand the value of their total compensation.

    This communication should cover any changes in benefits offerings, health care plans and how to navigate the enrollment process effectively. This also helps empower employees to make informed decisions, which helps increase retention and satisfaction.

    Measure results and make adjustments

    Gather feedback consistently via surveys and encourage employees to voice their thoughts on plans, process and effectiveness. This will help you create an adaptive and informed process.

    Collecting continuous feedback also helps ensure your plans align with what employees need. In the face of valid concerns, employers should focus on adjusting plan offerings that better meet the organizational and employee needs.

    The advantage of effective benefits administration

    Here are just a few ways effective benefits administration promotes an organization’s success.

    Employee retention

    Offering and effectively administering competitive benefits makes it easier to satisfy and keep employees through their total compensation. A clearly communicated, well-managed benefit program instills confidence and eliminates confusion. Employees also feel valued and heard when employers act on the feedback they collect around benefits. Satisfied employees mean reduced turnover, which ultimately reduces costs associated with hiring new employees.

    Employee well-being

    Great benefits reduce the emotional, physical and financial strain placed on employees. In turn, they increase employee morale and productivity. By ensuring that workers have the right amounts deducted from their pay, HR avoids compounding employee stress, too. Well-maintained benefit plans also demonstrate how an employer prioritizes their employees’ well-being.

    Reduced operational cost

    Using the right tech and processes helps streamline benefits administration, reducing operational costs and time spent fixing manual errors. The right HR software allows employee data to flow seamlessly through every tool and push updated data to benefits carriers.

    Staying compliant

    Benefits administration includes offering various types of leave, including paid family leave, as required by different states and municipalities. Effective benefits administration should ensure all your offered benefits comply with any state and federal regulations that cover your business.

    Benefits administration best practices

    You likely understand what makes an effective benefits administration process tick. Consider amplifying what you’ve learned by implementing these best practices.

    Communicate clearly and often

    One of the best ways to ensure your employees are using their benefits to their full potential is to communicate with them clearly. They should be educated on:

    • how the plan contributes to their total compensation
    • which plans are offered in health care and retirement
    • how much their employer contributes to them and their dependents
    • how much time they have to enroll themselves
    • changes they can and cannot make outside of the enrollment period
    • who to reach out to for any additional questions or concerns they might have

    Utilize technology

    Benefits administration is a highly task-driven process. It can be time-consuming without the right tech. Look for a single HR software that champions automation to help reduce manual data entry and the overall burden placed on HR.

    Gather feedback

    Employers should focus on identifying how their benefits affect employees and their well-being. To get a true sense of how benefits administration performs, continuously gather feedback. Using surveys and questionnaires can help you gain the right insight and make any needed changes and adjustments.

    Provide enrollment guides and tutorials

    The team responsible for benefits administration, usually HR, should work to prepare materials, including infographics, guides, benefits manuals and tutorials to give employees clarity. They can also use these resources to refer back to the information provided for questions about the process and plans.

    Monitor enrollment process

    For benefits administration to succeed, it’s important to monitor progress and adapt to ensure seamless operations. The right HR tech will offer reports on enrollment that visualize the entire process. Such a tool can even help you nudge employees who haven’t completed their enrollment.

    How does benefits administration software help?

    Modern tech can streamline most HR processes, including benefits administration. The right software offers automation throughout the entire process, from enrollment to ongoing support and reporting. Plus, it allows benefits data to flow seamlessly into every other piece of an employee’s HR life cycle, which makes it easier for HR to retrieve information if needed and reduce manual errors.

    Benefits administration may seem overwhelming, but that’s only if it lacks a solid strategy. An effective benefits administration process helps organizations retain employees, keep people satisfied, increase productivity and reduce turnover.

    Benefits administration: FAQ

    How can we stay compliant when offering benefits?

    It is essential to check state and federal regulations when offering benefits. For example, many states require a certain amount of sick or other type of leave for employees. If not offered, the employer could face penalties. Consult a licensed legal professional to verify the laws that affect benefits in the states where you operate.

    Why is it important to gather employee feedback after introducing benefit plans?

    Employers need to know if their benefits and the enrollment experience have a positive impact on employees. Organizations can readily collect this info through polls, surveys, questionnaires and more. This way, employers can determine if they need to make any changes or adjustments to their offerings and administration.

    Why is training employees on benefits administration important?

    Businesses spend a lot of money offering benefits to their employees, and they want to ensure they use those benefits to their full potential. Providing training and guidance to employees through manuals and tutorials ensures employees fully understand the process.

    Is it necessary to use a human capital management system (HCMS) or other software for benefits administration?

    While not required, using HCMS or similar technology helps reduce manual labor by automating core HR processes. It also reduces the time spent on manual and repetitive tasks while preventing errors.

    Explore Paycom’s resources to learn more about benefits, employee well-being and more.

    DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.