Outsourcing Employee Benefits: The Pros and Cons of In-House Administration

Administering employee benefits takes time. It means enrolling employees into benefits programs, managing tracking systems and data, notifying carriers and payroll of changes, distributing required notices to employees, developing appropriate accounting and reports, and ensuring that carriers are paid.

For a small employer, this might not be a difficult task. A single plan, a single carrier and limited employee turnover means few challenges. However, anything more complex can present a benefits administration nightmare. That's why it is important to know what is involved when deciding whether to administer or outsource employee benefits programs.

Questions Employers Need to Ask

First, consider your employee population and how many active participants your plans have. In addition, look at where they are located (centralized or scattered at several locations and different states), the amount of turnover, and whether or not there is a union involved.

Next, look at the complexity and number of benefit plans that need to be administered and who will be responsible if you handle the process internally. Consider if there are multiple carriers and how information will be transmitted to them. In addition, how will employee questions be addressed and how will their changes be handled?

Finally, consider how accounting and compliance will be ensured. Someone will need to be responsible for financial reporting, paying carriers and auditing enrollment. And how will COBRA notification and administration be handled?

Benefits Administration Actions

One of the chief issues with offering employee benefits is determining how to administer each plan. Many times, employers don't think about the effort that goes into actually ensuring benefits programs run smoothly. If you are considering administering your benefits program in-house, here are ten pieces of this puzzle:

• Employee enrollment
• Employee questions
• Enrollment changes
• Eligibility changes
• Open enrollment
• COBRA administration
• Plan audits
• Financial reporting
• Carrier payments
• Compliance

Knowing what is involved in benefits administration is important to making the best decision for your organization.

Outsourcing Benefits Administration

Outsourcing the administration of an organization's benefit plans isn't for every employer. However, there are very real benefits to gain if you decide to do so.

• Human Factor: When you outsource, you eliminate the need for headcount in exchange for experts who ably assist your employees with their questions.
• Cost Factor: While outsourcing programs will result in a cost for services, what you may save in reduced training, IT, manpower, and other costs can be worth it.
• Control Factor: Outsourcing allows you to control peak demand periods such as open enrollment as well as ensure the quality of your programs through quality control and compliance systems.

While experts may tout the benefits of outsourcing benefits administration by claiming reduced headaches, resource needs, costs, and risks, the decision as to whether or not an organization should outsource the administration of their employee benefits depends on many factors. Therefore, it should not be taken lightly. Take the time to decide whether outsourcing your employee benefits administration is right for you.