What is benefits administration?

Benefits administration is the process of creating, maintaining, and handling employee benefits for a company. This function is typically assigned to the human resources department. While the benefits could encompass several options, the more common benefits package include a retirement account, paid time off, health insurance, vacation pay, or parental leave. Businesses rely on a strong benefits package to obtain top talent, but managing these plans creates unique liabilities.

In addition to mandated health insurance enrollment, as outlined by the Affordable Care Act, failure to maintain accurate enrollment records or to make an error in distributing benefits could lead to claims of negligence and costly litigation. Benefits administration must also be free from discrimination and comply with fiduciary standards as established by the Employment Retirement Income Security Act.

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When do I need to be aware of benefits administration?

Benefits administration can be a complex undertaking, and accidental omissions can lead to hundreds of thousands of dollars in financial consequences. Fiduciary liability is just one aspect of the company’s responsibility, though federal regulatory compliance and employee expectation are two additional areas of concern.

What is important to know about benefits administration?

Without a proper behavioral risk management solution in place, motivation in the workplace can decrease, work quality can decline, and communication can deteriorate. To create a sufficient behavioral risk management system, there are some steps that should be taken:

Liability insurance for benefits administrators goes into effect when there are accidental errors and omissions on the part of the employer. Malicious intent or incidents involving fraud or illegal activity are not covered. There are some other important items you should know about benefits administration: Employers can be held liable for medical service costs and additional damages when an employee is overlooked and not enrolled in the health insurance plan.
Many companies are moving to HR and benefits administration software to reduce the risk of human error and oversight, in addition to establishing self-service portals for employees.
Some states have mandatory benefits requirements, such as disability insurance, though many benefits are provided in order for companies to provide a competitive edge in attracting qualified job applicants.