The success of a benefits program depends on how well it’s administered. To improve the outcome, employers often partner with various providers.

Here are three factors to consider before selecting a benefits administration partner:

1. Benefits Administration Models

Benefits administration can be insourced, co-sourced or outsourced, so you’ll need to know which one is appropriate for your business.

Insourcing means you handle your benefits administration tasks in-house via your own internal resources. Outsourcing means you turn over benefits administration to a third-party provider. Co-sourcing is a combination of the two, meaning some tasks are done in-house, and others are outsourced.

In 2012, Automatic Data Processing (ADP) reported, “Most employers of all sizes continue to handle at least some elements of benefits administration internally, although large employers are more likely to outsource benefits administration than are midsized employers.” More recently, in 2019, Bloomberg Tax & Accounting said that most smaller employers (58.8%) at least partially outsource benefits administration.

The most frequently outsourced aspects of benefits administration include:

Group health administration, as it relates to the Consolidated Omnibus Budget Reconciliation Act (COBRA), Employee Retirement Income Security Act (ERISA) and other related laws.
Flexible spending account (FSA) administration.
401(k) administration.

If you’d like to outsource only routine benefits administration tasks, you can look into an Administrative Services Organization (ASO). But if you want to outsource all of your HR obligations, including benefits, a Professional Employer Organization (PEO) may be a better fit.

2. Third-Party Administrator (TPA)

A Third-Party Administrator is an external company that manages employers’ group benefit plans. TPA services often cover:

Analysis and review of benefits providers.
Cost evaluation and negotiation.
Plan design and implementation.
Plan documentation and maintenance.
Staff education on benefit topics.
Benefits compliance.

Per the Society of Professional Benefit Administrators (SPBA), a “survey of employers that have in-house benefits managers reports that 79% of employers use TPAs.”

Some TPAs help with multiple types of benefit plans; others specialize in a singular benefit such as retirement plans or group health insurance. Although a TPA can relieve you of the stress associated with high-level benefits administration, it’s important to perform due diligence before choosing one.

3. Benefits Technology

A well-designed benefits platform is key to administrative efficiency and employee participation in the benefits program.

Common features of benefits technology:

Integrated — streamlines human resources, benefits and payroll administration.
Benefits compliance — simplifies adherence to benefit laws.
Communication tools — facilitates open enrollment and benefits education.
Employee self-service — enables online benefits enrollment and management.
Analytics and reporting — delivers fast access to reliable benefits data.
Electronic Data Interchange (EDI) — enhances communication with benefits providers.

When evaluating technology vendors, be sure to examine the platform’s scalability, workflow-automation capabilities and decision-support tools. These characteristics are vital to efficiency, accuracy, compliance and the overall performance of the benefits function.