Definition of Benefits Administration
You know that you want to have a competitive benefits package for your employees, but what does that mean when it comes to day-to-day operations? Will this require a significant amount of time and effort to administer these benefits options?
Benefits administration of the company’s employee benefits programs is literally the process of:
- Designing the overall program
- Developing the strategy for implementing the benefits
- Managing the annual process of benefits enrollment and ongoing COBRA administration
- Maintaining ongoing benefits, terminating benefits for former employees, and new employee benefits
Your company’s benefits administration could be a manual process, automated via software, or even outsourced to a reliable vendor.
Why benefits administration is vital to your company’s success
Qualified benefits programs are federally regulated, often offer a degree of tax advantage, and require attention to detail. Some examples of these benefits include:
- Insurance for healthcare, life, and disability
- Retirement accounts, including 401(k), 403(b), Keogh, and profit-sharing accounts
- Certain medical flexible spending accounts
General benefits that need oversight but aren’t qualified plans include items such as:
- Paid time off (PTO) banks, vacation, sick leave, and holidays
- Tuition reimbursement
- Parking and childcare reimbursement accounts
- Gym memberships
Your company will need to define when your benefits administration year begins and ends so you know when to plan for your employees’ annual benefits enrollment process. It is during this period of time that employees can choose to make changes to the benefits they elected during the previous benefits year.
WITHOUT COMPETITIVE BENEFITS, YOU RISK YOUR ABILITY TO HIRE STRONG TALENT AND REMAIN VIABLE IN YOUR MARKETPLACE.
You need to make sure that whoever administers your benefits programs understands the boundaries around when employees can and can’t make changes to their elections. Changes that people make outside of qualified plan parameters jeopardize your company’s ability to offer competitive benefits.
Without competitive benefits, you risk your ability to hire strong talent and remain viable in your marketplace.
When did benefits administration become such a disciplined process?
Although employers have used some form of benefits to attract employees for hundreds of years, the federal government started putting regulations in place in 1921 with the passing of the 1st version of the Revenue Act. It was at this point that companies were permitted to take a tax deduction for various retirement contributions they made on behalf of employees.
That was where benefits administration regulation started. Since that time over 100 years ago, there have been multiple iterations of what was deemed acceptable and how those benefits were to be managed.
Most of the benefits administration requirements are under Title I of the ERISA (Employee Retirement Income Security Act) umbrella. Some examples of legislative items that impact how your benefits plans are administered include:
- 1985’s passage of COBRA (The Consolidated Omnibus Budget Reconciliation Act)
- 1996’s HIPAA legislation (The Health Insurance Portability and Accountability Act) along with the Mental Health Parity Act and the Newborns’ and Mothers’ Health Protection Act
- 1998’s passage of The Women’s Health and Cancer Rights Act
- 2008’s GINA law (The Genetic Information Nondiscrimination Act) and the Mental Health Parity and Addition Equity Act
- The Children’s Health Insurance Program Reauthorization Act
- The ACA passed in 2010 (Patient Protection and Affordable Care Act)
The laws on the list above only represent 25 years of legislative processes. This is why you must have an HR professional with a strong benefits foundation managing your company’s benefits processes.
Additional benefits resources you will find helpful
- 9 ways to make benefits administration easier: An HR checklist
- Your step-by-step guide to automating benefits administration
- How do I begin with employee administration?
- What HRIS systems are best for small businesses?
- 10 steps for stress-free open enrollment administration
- Simplify benefits administration
Effective benefits administration can make or break your company
Because so many benefits programs are regulated, the mismanagement of those programs can result in governmental fines and even civil penalties and lawsuits. Ensuring you’re administering your benefits programs properly will serve you well. This is why many companies prefer to outsource to a company that specializes in managing employee benefits.