Employee benefits are a driving force behind employee recruitment and retention. Your benefits program can motivate your employees to stay and draw new candidates to your company. Therefore, it’s essential that your human resources department understands benefits administration and how to manage it effectively.
What is Benefits Administration?
Benefits administration is how your HR department develops and manages benefits for your employees, typically with the help of HR software. It is part of the larger process of managing employees. Benefits administration also includes deciding which benefits to offer employees, including voluntary benefits, setting rules for eligibility, open enrollment and transferring data to carriers.
What does a Benefits Administrator do?
Your company’s benefits administrator is responsible for directing and planning the day-to-day operations of your company’s group benefits programs. He or she provides customer service to all employees, designs benefit plans, investigates new benefits, improves existing programs and supervises and monitors benefits administration.
About the Employee Benefits Security Administration
The Employee Benefits Security Administration (EBSA) is an agency of the U.S. Department of Labor that educates and assists nearly 154 million workers covered by employer benefits. The EBSA provides direct assistance to workers that helps them understand their plans, beneficiaries and service providers. The EBSA’s goal is to make sure plan participants understand their rights under the law and are able to recover any benefits they may be entitled to. This knowledge allows benefit administrators to better understand and comply with the law.
5 Essential Steps in Benefits Administration
1. Decide which benefits to offer
Today’s employees are putting more value on benefits rather than salary because of the advantages and flexibility those benefits provide to them and their families. Popular benefit packages include a mix of traditional and voluntary benefits that provide numerous avenues of coverage to help employees offset health costs. Employee benefits include:
- Healthcare, dental and vision insurance. According to SHRM, 95 percent of employers surveyed chose healthcare benefits as the most important to the majority of their employees. A strong healthcare, dental and vision package can be used by employers to attain and retain talent for them.
- Retirement savings including a benefit pension plan, 401(k) plan, Roth 401(k) plan, 403(b) plan, 457 plan, SIMPLE plan and SEP plan. An employer-sponsored retirement plan allows employees to deduct savings directly from paychecks, offer various tax breaks and offer matching contributions by employers to build up savings quickly.
- Alternative benefits including critical illness insurance, hospital indemnity insurance, student loan assistance, financial wellness planning and pet insurance. Voluntary benefits supplement the coverage of traditional benefits for employees who may be in danger of being financially devastated in the result of unexpected circumstances hitting them. Some of these plans offer cash assistance to help pay for bills not associated with the medical bill.
- Office perks are things employers can offer, that cost little to nothing, that help attain and retain top talent. These perks include bonuses, flexible work hours, wellness programs and gym memberships.
2. Manage benefit costs
Benefits should motivate employees while staying cost-effective for both employers and brokers. According to the Bureau of Labor Statistics, the average cost of employee benefits is $11.82 an hour, while wages and salaries cost employers $25.91.
Look for an employer-based plan that balances cost and coverage. Typically an employer covers 70% of the medical, dental and vision costs of a plan. Choosing a bundled payment could save on costs. According to SHRM, bundled payments are a form of contracting that combines pre- and post-procedural care into one negotiated price that can deliver savings and simplify billing for organizations and employees.
Offer a variety of benefit options, including voluntary benefits. Voluntary benefits are considerably less expensive and help meet the needs of your employees. By offering a variety of options, employees can personalize their coverage.
Adopt cost management techniques. There are a variety of techniques that can control health care costs. According to SHRM, the most popular are nurse advice lines that are available 24 hours, telemedicine that allows employees to be treated online and case management services that identify barriers to getting the best care.
3. Administer benefits efficiently
Managing benefits administration requires keeping a lot of balls in the air. For example, communication must remain open, compliance needs to be met during open enrollment and selections need to be sent to the appropriate carriers. If all of these tasks are performed through manual workflows, you could be setting yourself up for serious issues.
Benefits Management software simplifies the management of all benefits-related data for HR administrators and end-users. It helps keep lines of community open, offers complete transparency about the benefits your company offers—including what’s available and which your employees have chosen, while easily integrating with insurance carriers, payroll providers and ERP systems.
Tasks will be automated, reducing the need for paper, and saving hours of time, not to mention cutting costs.
4. Maintain compliance
Benefits administration requires knowing all of the compliance rules and regulations set by the federal government, including ACA, HIPPA, COBRA and FMLA. These regulations cover medical authorization, labor laws and financial stipulations.
All businesses with 50 or more full-time employees (FTEs) are required to offer some kind of group health insurance plan to their workers, or they will be hit with a tax penalty. The coverage must extend to at least 95% of your employees and their dependents.
Employers also need to maintain compliance with the Affordable Care Act (ACA). ACA compliance includes determining which employees are eligible for coverage, sending them 1095-C documents and filing 1094-C paperwork directly with the IRS.
The Health Insurance Portability and Accountability Act (HIPAA) protects workers by providing additional opportunities to enroll in group health plan coverage when they lose other health coverage, get married or add a new dependent. HIPAA also prohibits any discrimination from changing enrollment or premiums due to health factors.
Employers with more than 20 employees must offer COBRA. COBRA protects employees, former employees, spouses, former spouses and dependent children from losing their health coverage due to a death, termination or reduction in hours (gross misconduct excluded), becoming eligible for Medicare, divorce or legal separation and a child’s loss of dependent status.
The Family and Medical Leave Act (FMLA) entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons. It applies to private-sector employers with 50 or more employees, public agencies and public or private elementary and secondary schools.
5. Align benefits to your employees’ needs
Your benefits program shouldn’t exist in a vacuum. Employee benefits should adapt over time. For example, as the demographics of your employees change, so should your benefits. Younger employees want student loan repayment and paid leave for new parents. Older employees want a good retirement plan. The key is to research what your employees want, through surveys, to offer a benefits package that resonates with the majority of your employees’ needs and where they are in their lives.
Look at your current benefits and evaluate how much they are used, the services offered, coverage, effectiveness, cost, plan experience and competitive trends in benefits programs to determine if they need to change.
Send employees benefits surveys and review the results. By analyzing the data, you’ll be able to better forecast trends and plan for future benefit packages. You’ll also be able to put together a plan you can send to management.
Tips on Improving Employee Benefits Management
The right HR software can make all the difference when managing employee benefits.
- Reduce payroll errors. Manual payroll processes leave you open to mistakes, leading to fines and penalties caused by noncompliance. An automated system ensures accuracy because data is shared automatically, reducing any need to have a human input the information. Plus benefits administration software saves time and gives HR administrators and employees the ability to look at benefits selected, pay stubs and other HR information.
- Keep detailed records. Benefit management software allows you to keep detailed records and make sure all workflows are completed on time. HR automated tools help support greater organizational communication, transparency and increase company-wide productivity.
- Automatically ensure compliance. Regulations continually change and benefits management software automatically updates so you never have to worry about if you have the latest version of paperwork. The right software will guarantee that if any compliance issues arise, a fix will be employed and pay for any feeds that may rise.
- Advanced options to simplify the process. Benefits administration software should be able to calculate the age-banded benefits for each employee eligible to enroll in the ACA. It should also easily customize benefits for each employee and quickly deduct employee selections from payroll. For administrators, HR software can easily transfer employee selections to the appropriate carriers and gather information for reporting.
- Choose software that scales with you. Just as your employee demographics may change, so might the size of your company. Your HR software should be able to scale with you, integrating with your current technology and any external products you may need in the future.
Arcoro’s Benefits Management software is a cloud-based module that automates critical workflows to improve processes for both HR administrators and the employee population they manage. Its built-in integration with over 300 partners creates an established connection to internal and external applications including sending data to insurance carriers, payroll providers, brokers, ERP systems HCM platforms and more.
With this HR automated solution, you can enhance communication and transparency company-wide. You can also navigate compliance, secure, manage and transfer high-compliance data from internal and external systems, including sending data to insurance carriers, payroll providers, ERP systems and more.