benefits administration

What is benefits administration?

Benefits administration is the process of assembling and managing the benefits an organization provides to employees. Employee benefits typically include health, disability and life insurance; individual retirement accounts and 401(k); wellness plans; flexible spending accounts; vacation and paid time off and sick leave; and maternity leave.

Many vendors sell software that can help benefits administrators, who are usually members of an organization's human resources (HR) department. Traditional benefits packages have expanded to include offerings such as pet insurance, student loan repayment, commuting subsidies, legal services, incentive-based health and wellness programs, and employee perks and discounts on products and services.

Employers also are increasingly asking workers to assume more of the cost of benefits, with voluntary, or employee-paid, offerings. The advantage of this approach is cutting employers' costs while providing more customizable benefits to employees.

Benefits administration technology

HR technology companies -- ranging from large software vendors such as Oracle and SAP to HR tech vendors like Workday and Ceridian HCM -- typically provide benefits administration capabilities in their human capital management (HCM) systems, either using their own software modules or by integrating with third-party systems.

Also, independent benefits tech companies, such as Benefitfocus, Castlight Health, Namely and Zenefits, provide full-service benefits platforms in the form of software as a service (SaaS) systems. HR tech outsourcing vendors also provide benefits capabilities for small and medium-sized businesses (SMBs). Other benefits software products are designed to work with benefits brokers, who provide them to client organizations and help them design custom systems based on their needs and employee preferences.

Benefits software often works by providing HR managers with a dashboard showing benefits offerings and usage patterns by employees. Software also can analyze anonymized insurance claims data to suggest individualized benefits configurations to employees that best match up with their benefits usage patterns. Benefits administration systems can also include mobile apps with social media-type user interfaces that simplify the process of annual open enrollment and benefits selection. They might also include employee self-service functions to enable workers to make changes in benefits and engage in communication with benefits administrators.

Some benefits systems include features that tie into wearable activity and health tracking devices and tailor incentives such as insurance discounts for employees who meet certain goals.

Benefits administration process

Benefits administration starts with deciding on what kind of insurance coverage and copays an organization will offer employees, and then designing the array of other employer- and employee-paid benefits. The benefits program should align with the master employee list, which contains personal data for every employee, and account for special employee needs, part-time and temporary hires and changes in government regulations.

Employees should be trained in how to use the benefits program and how to take part in open enrollment. Software-based benefits administration systems have largely done away with paper enrollment forms and brochures.

Role of benefits administrator

The benefits administrator keeps employees informed about their benefits and retirement accounts and often works with a benefits broker on selecting specific benefits plans. The HR professional in charge of establishing, maintaining and managing the benefits program is often conversant in technology and is able to help the chief HR officer and IT executives evaluate and select the right benefits administration software systems for larger enterprises and the appropriate outsourcing benefits vendor for small organizations.

This was last updated in July 2023

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