5 Essential Features for Benefits Administration Software
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By Dave Foxall
Benefits Administration Software Essentials
The universal (and historical) “core” of the HR department is to make sure that people are paid and provided with the necessary and agreed-upon benefits—a fact that has changed little even as more strategic views of the HR industry have emerged. In fact, CedarCrestone’s 2011-12 HR Systems Survey identified benefits management (along with HR record-keeping and payroll) as a top three function essential to HR administrative excellence. However, it’s incredibly important for companies to understand that the best way to manage that benefits provision will vary from one organization to another. For many, the overwhelming amount of time, resources, and expertise needed to run even a minimally effective benefits operation will make a strong argument in favor of outsourcing. On the other hand, for many companies the very idea of an outsourcing strategy can be perceived as an impossibility due to negative perceptions, change management concerns, or even stability questions that surround the outsourcing industry as a whole. As such, it’s little surprise that an increasing number of organizations are turning to benefits administration software as a method of choice—keeping the benefits management function in-house while automating as many processes as possible.
What is Benefits Administration?
Of course, understanding the necessity for benefits administration automation still fails to explain exactly what is needed in terms of these HR applications. Sourcing Analytics in a recent report (Benefits Administration: The Impact of Outsourcing on the Total Cost of Ownership), clarifies by offering the following essential features of what benefits applications should provide.
Determining eligibility for a set of benefit plan types,
Communicating eligibility and plan options to employees,
Managing enrollment for benefits at hire,
Managing enrollment for benefits upon a status change,
Managing enrollment for benefits at annual enrollment,
Managing the flow of data to the network of carriers/benefit providers, and
Managing the flow of benefit deduction information to the payroll system(s).
While this list makes it clear what benefits administration software must achieve though, organizations looking at automation may still be unclear as to what software features will perform these functions. As such, what follows are the top five features that are essential to in-house benefits administration automation.
Though open enrollment is the major "event" of the benefits cycle that often provides the driver for acquiring benefits administration software, the fact is that it is that there are numerous employee life events that can trigger the necessity for benefits changes. In fact, SHRM (The Society for Human Resource Management) states that, “The most effective e-benefits websites are organized by life events such as marriage, birth and death or by changes in work status, such as layoff and promotion.” Consequently, a must-have for any benefits solution is the capability to manage and analyze changes for each specific event. As such, when evaluating prospective benefits administration applications, organizations should look for feature-sets that allow for:
Open Enrollment approvals and activations en masse;
Open Enrollment-specific and tailored communications (both scheduled and ad hoc);
Typically, allocating and managing sick, vacation, and personal time off is a major part of the benefits administration function in any organization; irrespective of employee population. As such, it is absolutely essential that any selected software solution be able to manage this function effectively. However, PTO capabilities for benefits administration automation can be found in any number of HR software solutions, from workforce management suites all the way down to ground-level time and attendance applications—a fact that can make the selection of a solution for PTO confusing and difficult. Organizations with complex PTO needs and/or convoluted policies concerning PTO then, should carefully consider the exact capabilities an automated solution can bring to the table; especially as it pertains to the unique requirements that company might have. For example, public sector organizations use a number of various forms of PTO (e.g. Community Service, Adverse Weather, etc.) that are “non-standard” compared to other sectors; and may not have all features supported in a solution that only deals with general PTO banks.
Though for good reason, the benefits administration function has become something of a compliance catch-all; dealing with medical mandates, financial rules, labor laws, and other compliance-driven activities. As such, perhaps more than any other area within the HR fold, benefits often carries more legal exposure and risk if handled improperly. Indeed, as the aforementioned SHRM report notes: “Managers responsible for compliance with legal mandates (such as COBRA or the Family and Medical Leave Act) use systems to monitor employee status, payment and eligibility for health care benefits…programs [which can] carry significant financial penalties for noncompliance.” This facet of benefits administration bears close watching and the right software can do much to monitor and potentially even mitigate compliance risk; allowing the organization to stay abreast of any regulatory changes that could impact the organization.
One of the surest ways to drive up employee engagement is to provide resources that deal with financial security and demonstrate that the company sees the employee as a long term investment by placing emphasis on retirement planning. However, corporate investment and retirement programs link to numerous complex financial processes (especially when considering stock options and matching contributions, etc.) which can be an in-house staffing and resource drain. Even so, investment and retirement management functionality is essential for any benefits administration software solution. At the selection stage, look for vendors whose products offer genuine flexibility in plan designs, investments, and organization/employee involvement while still balancing effectiveness and security.
Benefits Software Essential Feature #5: Payroll Process Integration
A final small but highly important point is the need for any benefits software to be able to integrate with the organization’s payroll solution. Not only does this integration reduce the time and resource wastage of duplicate data entry, but many benefit functions have direct bearings on employee take- home pay (e.g. pre-tax Health Savings Accounts, 401k contributions, etc.) and anything less than seamless integration between benefits administration and payroll is a recipe for inaccurate payslips and unhappy employees.
Final Thoughts on Benefits Administration Software
There are perhaps two balancing points to be made regarding benefits administration software. Firstly, some analysts and commentators are marking trends in other directions. The CedarCrestone Systems Survey noted, “We have been hearing from benefit solution specialists that as healthcare reforms become more complex to administer due to the changing regulatory environment, more organizations will move from a technology-only solution that they administer themselves. They will move to point solutions provided by specialists that deeply specialize in the space as not all of the enterprise technology vendors are paying enough attention to the complexities.” Secondly, although benefits software can greatly streamline the in-house benefits administration function (especially through the use of a benefits webpage for the transmission of key information and conducting workforce transactions), SHRM warns against an over-reliance by HR on such tools.
Specifically, SHRM states that “The benefits website can be a rich source of information for employees, but it should not be the only source. Benefits are more complicated today than ever before, and pending changes in health care and pension benefits will only make the potential for confusion worse. Employees may not be able to make sense of choices and rules from the website and may need to speak with benefits experts to assist them in understanding the choices they will face.” However if, after due consideration of other options, the best strategy for an organization is in-house automation, the above "essential features" will help determine exactly which vendor solutions should be short-listed for further and more detailed evaluation.
Though open enrollment is the major "event" of the benefits cycle that often provides the driver for acquiring benefits administration software, the fact is that it is that there are numerous employee life events that can trigger the necessity for benefits changes.”