How to Manage Employee Benefits Administration Without Overwhelming Your HR Team

If you’re an HR leader in a small or mid-size business, you’re wasting a frightening amount of time on benefits administration. The issue isn’t that benefits are inherently complicated – it’s that the administrative processes surrounding them are unnecessarily difficult in most organizations. These administrative burdens can be deceptively consuming; you won’t solve this by throwing more people at the task. You need to rethink where and how work gets done.

Start with a time audit

If you’re going to do anything about this, the first order of business is to understand where time goes. Seems simple, but most HR managers haven’t actually done this exercise.

Take a week and track every single benefits administration task in 15 minute increments. Chances are you’ll find the same patterns emerging: manual data entry, reconciliation across multiple carriers, responding to the same employee questions over and over again, and chasing employees for documentation during onboarding/offboarding.

That last bullet point deserves special attention. If your HR team’s email is filled with the same recurring questions during open enrollment, chances are you need to rethink your communication strategy.

The purpose of a time audit is to identify processes that create genuine compliance complexity vs. administrative work that makes things seem more complex than they are.

Streamline data entry

The single biggest time suck in benefits administration is the reconciliation of data across systems, particularly if you enter information manually. Some small businesses have employees who enroll in or change their benefits, and that information has to be manually entered into the HRIS by HR, then keyed in again by whoever is managing the carrier’s website, and sometimes a third time in payroll.

This is where benefits errors creep in. While having incorrect benefits information can be an issue in and of itself, they often come with headaches for HR as well. A benefits error can easily occur during the reconciliation process between the carrier and the payroll system, causing discrepancies in withholdings. This can cause issues for employees if they think they’re enrolled in a particular plan when they are not.

The easiest way to stop benefits errors is to establish a connection (sometimes referred to as an EDI feed; EDI stands for electronic data interchange) between your HRIS and your carrier(s) so that information gets entered once and flows directly into the appropriate systems. If you have an employee self-service portal, chances are the employee or retiree can update their enrollment through that portal; there’s no need for HR to key it in, or correct it, or reconcile it if nobody has to enter it in the first place.

Most modern-day HRISs use ESS (employee self-service) or integrate with third party ESS software. So if you’re looking for an easy way to reduce administrative complexity, finding a vendor that has ESS or EDI capabilities is a good starting point if you’re looking to transition away from paper files and spreadsheets.

Build a year-round communication cadence

Open enrollment is brutal for most HR teams, because it’s this massive undertaking that has to be managed within the span of a few days. You’ll field questions from employees who haven’t actively thought about their benefits in over a year, who might have competing priorities at work or home, and who are now realizing that they need to make important financial decisions. Open enrollment is an annual sprint for most HR teams.

The real issue is that most small businesses treat it as an annual sprint, rather than as a year-round communications effort.

A good start is to build a quarterly benefits touchpoint. This could be as simple as a brief email reminding people to contribute to their flexible spending account by the March deadline, or explaining how their health savings account works, or holding a 20 minute webinar in September to preview the upcoming open enrollment period and field questions.

This accomplishes two things: it gets employees thinking about benefits throughout the year, so that during the enrollment sprint, they make thoughtful decisions that meet their needs, and it reduces the number of questions that you’ll receive as an overwhelmed HR director.

This has value beyond just reducing your administrative load; if you’re able to communicate benefit details clearly to employees, you’ll see reduced disputes around your summaries of benefits, reduced complaints, and higher participation in the plan designs that you’ve selected (and purchased). All of these are important factors in selecting plan designs you’re happy to pay for.

Standardize your compliance workflows

COBRA administration is a high risk area of benefits administration for small businesses. Miss a single notification deadline and you could be on the hook for substantial penalties. Same goes for ACA reporting requirements or non-discrimination testing for your flexible spending or health savings accounts.

The way that most small HR teams manage this is by either having someone write it all down or, in many cases, having the knowledge live in one individual’s head. And if that individual suddenly becomes unavailable, the entire firm’s ability to remain compliant takes a hit with it.

Most HR teams would benefit from formalized checklists that are tied to employee events in their HRIS software. When an employee’s status changes to terminated, a checklist item gets checked off and HR sends out a COBRA notice, terminates coverage, and reconciles final billing with the carrier. This replaces the uncertainty of “what should I do” with the certainty of “here’s what I need to do.”

If your compliance issues are more nuanced (IRS Form 1095-C reporting for ACA, administration of your FSA plans, non-discrimination testing for your HSA plans), you might want to consider whether a third party administrator would be right for your organization. The right TPA (third party administrator) can minimize errors and costs associated with specialty benefits administration, and save you time on the front end by not having to learn the nuances of specialty administration in the first place.

Consolidate carrier billing

If you have a diverse benefits menu that includes multiple carrier options for medical plans, dental, vision, and a couple of voluntary benefits, you’re probably reconciling 5-6 invoices every month. This is extremely time consuming, especially if you have to investigate discrepancies, determine whether an employee is overpaying or underpaying, and ensure that everyone’s payroll deductions actually match up with the invoice.

If you’re doing consolidated billing either through your HRIS or through a broker/administrator who handles this for you, reconciliation is much less of a pain. You’re only dealing with one statement, one invoice, and one check to cut – and the amount of time saved will add up quickly.

Consolidated billing can also be an opportunity to rethink your benefits menu in terms of the number of plans you offer. Offering eight plan options across medical, dental, vision, and behavioral health sounds impressive, but it means eight times the paperwork as compared to three thoughtfully selected plans. Studies repeatedly show that more options do not lead to improved decision-making or satisfaction with benefits. Streamlining your benefits menu shouldn’t be thought of as cheap or budgetary – it should be seen as an investment in your employees’ well-being and your own time.

Know when to outsource the whole operation

There comes a point with streamlining benefits administration where you’ve optimized everything you can, but the administrative burden is still too great for your small team to handle effectively. If you have one generalist HR person, you already know that expecting them to handle the configuration of your HRIS, carrier negotiations, ACA reporting, COBRA administration, and year-round employee communication is asking a lot.

If you’re at the point where you can’t streamline, the next option is to outsource benefits administration to either a broker of record, or to a PEO (professional employment organization). When considering the latter, reviewing PEO health insurance options can help you compare how different arrangements handle plan access and administration.

Brokers and record keepers help you negotiate your insurance contracts, and may help you with the administration of your plan, but they generally stop there. Brokers don’t administer plans; they help buy them. If you go this route, you’ll still be responsible for your plan’s employee communication, enrollment, claims, compliance, and billing administration.

PEOs follow a different model. They operate as co-employers for the purposes of benefits administration, so that small businesses can tap into the larger group rates that would be unavailable to them otherwise.

In exchange for a fee (usually paid by the small business), the PEO assumes responsibility for most aspects of administering benefits to your employees, including claims administration, enrollment, and compliance. Small businesses that go the PEO route are able to reduce payroll costs significantly for their employees, who in turn are offered more comprehensive benefits packages, such as health, dental, vision, and retirement plans.

By shifting some of the burden of compliance and administration to a larger entity, the PEO model can be a huge win for small business owners, who might otherwise struggle to keep up with constantly evolving regulations or find themselves unable to compete with larger employers for talent.

On the flip side, a PEO is also an expensive option and may not make sense for your small business if you’re just starting out, or if you have a sophisticated benefits administration team that wants to retain control over the employee experience.

TPAs (third party administrators) can help fill the gap between a PEO and completely insourcing benefits administration. They can handle FSA administration or other specialty areas, and can be an option if your current benefits administration is mostly working, but one particular area is proving too time consuming, complicated, or expensive to handle internally. If a PEO is more comprehensive than you need, but your current processes are unsustainable, a TPA can serve as a middle ground.

Understand your capacity

It’s rare that any one company has the exact same needs. Here’s a brief overview of the maturity model for benefits administration: start with self-service portals so that you’re not doing manual data entry, layer in year-round communication so that open enrollment isn’t this terrifying sprint, standardize compliance by establishing checklists so that you’re not playing compliance roulette every quarter, and then use TPAs, PEOs, or other outsourcing options where appropriate so that you’re not spending all your time wrestling with carriers.

Some 40 person companies with an established broker and a competent HRIS may never need a TPA. Some 90 person companies with an office manager who also takes care of AP and AR may need a PEO more than they need a TPA.

It’s not about finding the fanciest solution. It’s about finding the solution that makes your life easier that doesn’t involve reconciling carrier invoices every Sunday night in preparation for payroll on Monday morning.