Everything You Need to Know About Employee Benefits Administration

When we think about employee benefits, we think about the results they achieve. The satisfaction your workers experience, the problems they solve, and the candidates they attract during a recruitment drive. We spend less time considering how those benefits magically appear in the hands of employees. 

This guide looks behind the scenes at benefits administration, including processes, best practices, and why to simplify your benefits management using a streamlined platform. 

What is employee benefits administration?

Employee benefits administration is the process of choosing, distributing, and communicating benefits to employees. These benefits can include health insurance, retirement accounts, paid time off, and other perks employers offer as part of their total rewards model.

Traditionally, benefits administration has been a long-winded and manual process, with HR departments spending hours on paperwork and managing communication and enrollment with multiple vendors. However, automated benefits administration software is now available to streamline this process, saving time and resources for busy benefits teams.

The benefits administration process

Benefits administration is often a responsibility handled by the HR department, although larger organizations may have a separate benefits administration team. Another option is to outsource to a hired professional organization (PEO) company. Regardless of the method, the process typically involves the following steps: 

Assess workforce needs 

Begin by understanding what your employees want and need from their benefits package. You can incorporate plenty of shiny perks into your program, but you’re wasting your money if they’re not attractive to your workers. 

Example: A company in the heart of the city offers monthly free car wash services as an employee benefit. While well-intentioned, this perk misses the mark for most of this company’s workforce, who aren’t car owners. It fails to address the practical realities of the employees’ daily lives or support their actual needs. Instead, transit passes, bicycle maintenance vouchers, or flexible work arrangements would better enhance employees’ work-life balance and commuter experiences.

Create a benefits budget 

Budgeting for employee benefits should include the cost of the benefits and the administrative costs associated with managing them.

The size and profitability of your business will determine your benefits budget. Understandably, SMEs may need to offer more luxurious benefits than larger corporations. However, even small businesses can get creative with their budget by offering flexible spending accounts or utilizing technology to automate the process and reduce administrative costs.

Benepass tip: Need to understand how your benefit offerings compare to your competitors? Review our Benepass Benefits Benchmarking Guide, which provides breakdowns of benefits trends by company size and industry. 

Design benefits packages 

Building the perfect benefits packages based on your budget and employee needs means selecting specific plans from insurance providers or deciding which perks to offer in-house. 

When designing benefits packages, it’s essential to consider your workforce’s demographics. For example, younger employees may be more interested in flexible work arrangements and wellness stipends, while older employees may prioritize retirement plans and long-term disability coverage.

Research and negotiate 

Shop around for potential benefit providers or partners. This could include insurance companies, financial institutions, or wellness program vendors. 

When researching providers, it’s crucial to consider cost, quality of service, and company reputation. Negotiating with multiple providers can help you get the best deal for your organization and employees.

Stay compliant 

Employers are subject to various laws and employee benefits regulations. Failure to comply may result in penalties and damage to your employer brand. Some top regulations to know about include: 

• Affordable Care Act (ACA):  Requires employers with 50 or more full-time employees to offer health insurance that meets certain standards. 
• COBRA (Consolidated Omnibus Budget Reconciliation Act): Allows employees who have lost their jobs to continue their health insurance coverage for a limited time. 
• ERISA (Employee Retirement Income Security Act): Sets standards for employee retirement plans, such as 401(k)s, and requires employers to provide employees with plan information upon enrollment.
• HIPAA (Health Insurance Portability and Accountability Act): Protects employees’ health information privacy.
• Medicare: Employers must pay Medicare taxes for each employee’s wages and report this information annually.
• Family and Medical Leave Act (FMLA): Provides employees with up to 12 weeks of unpaid, job-protected leave for certain medical and family reasons

Employers must stay updated on these compliance requirements and ensure their benefits packages align with the laws. 

Enroll employees 

Enrolling employees in your benefits programs may involve having them fill out paperwork or using an online enrollment platform. It’s important to provide clear information about:

• Enrollment dates
• Tax implications 
• Eligible criteria for joining the program 
• Plan summaries 
• FAQs 
• Contact details for the benefits administrator
• Any resources that support employees in better understanding their benefits options to make informed decisions

Managing changes and terminations 

As employees come and go or experience life changes such as marriage or having a child, you may need to update their benefits. It’s important to have a process to manage these changes and inform employees about the impact of these updates.

Measure results and update 

A regular review and analysis of your benefits program can help organizations make informed decisions about their benefits packages. Your review could include:

• Employee satisfaction rates 
• Benefit program participation rates
• Cost-effectiveness 
• The latest industry trends to ensure competitive offerings

6 best practices for managing your employee benefits

Effective employee benefits management requires proper planning and prep work to achieve employee satisfaction and operational success. Here are six best practices to ensure your benefits program is as beneficial to your organization as your employees.

1. Seek employee input 

If your current benefit offerings suffer from low participation and engagement rates, you may be guilty of prescribing benefits without asking employees what they want. Consider the following ways to collect vital input from your employees: 

• Benefits focus groups 
• Pulse surveys
• Stay and exit interview data
• 1:1 meetings with managers and HR

By gathering employee feedback, you can tailor your employee benefits program more effectively to meet their needs and preferences.

2. Actively listen to feedback 

If your employees have taken the time to offer their insights and are telling you that a specific benefit isn’t working, it’s important to take action and tweak your benefit offerings accordingly. 

3. Communicate your benefits programs 

An essential aspect of benefits administration is communicating how the program works and what benefits are available to employees. 

One of the most challenging aspects of communication is delivering unpopular decisions to your employees. If your benefits package changes in a way that negatively affects employees—perhaps if a specific plan item is no longer within your budget—it’s important to be transparent and explain the reasoning behind the change. 

Vanessa Cotlar, VP of PolicyMe, offers some advice relevant for benefits administrators struggling to deliver difficult decisions: 

“In HR, conviction is key. Our opinions may not always be the most popular. Our opinions may not always be understood by everyone. But our opinions should be rooted in research and experience that help us offer insights that enable businesses to move forward with the best possible course of action.”  

4. Keep accurate records 

To comply with regulations, benefits teams must keep accurate records covering employee enrollment, changes, termination dates, and more.  This includes: 

• Documentation such as benefit plan summaries
• Notices to employees
• Open enrollment materials 

By maintaining organized and up-to-date records, benefits administrators can easily provide proof of compliance in the event of an audit or legal dispute.

5. Maintain your technology 

Whether you use benefits platform software or rely on a patchwork of spreadsheets and documents, keeping your technology up to date and functioning properly ensures:  

• Sensitive data is protected from cyber threats
• Employees can easily access their benefits information
• Administration is streamlined and efficient 
• Your software can integrate with other relevant systems, such as HRIS or payroll tools 

6. Simplify your approach to benefits administration 

Benefits management involves many moving parts—from liaising with different partners to enrolling employees in numerous programs, it can be resource-heavy. One way to simplify things is to use a single lifestyle spending account to deliver a wealth of employee benefits. Employers pre-fund the account monthly, and employees can choose the benefits that best suit their needs. For example, one of your team members might spend their benefit allowance on wellness while another invests in professional development. 

If you offer both pre-tax benefits and post-tax benefits like meal allowances, consider seeking a platform capable of consolidating both types of accounts in a single platform. Many employers use separate administrators for pre-tax benefits and perks, but this increases administrative burden and costs. Instead, use a platform like Benepass to manage these accounts, creating a simplified experience for both admins and employees. 

Streamline benefits management with Benepass

Benepass offers simplified benefits administration systems from a central location. Our people-first solution provides the following flex stipends and pre-tax benefits that suit your employees and their lifestyles: 

• Lifestyle Spending Accounts 
• Flexible Spending Accounts 
• Health Savings Accounts
• Commuter Benefits 
• Health Reimbursement Arrangements
• Wellness Benefits 
• Food Benefits 
• Family and Childcare Benefits 
• Professional Development Benefits 
• Remote Work Benefits 
• Rewards and Recognition Benefits 

Ready to make benefits administration easier in your organization? Book a free Benepass platform demo today to see it in action.