Enhancing your benefits administration practices for risk mitigation

Authored by Nicole Olszyk

As a broker partner, many of the ongoing conversations you have with your clients are crucial to ensuring their employee benefits program is successful. There are always the typical renewal season type questions around cost, employee satisfaction with the program and plan selection, but there are other gaps you should consider filling. The most important being around compliance and administration to assist in reducing the amount of risk their benefits plan could create.

There are inherent risks with any employee benefits program. These risks include things like compliance, cost control, administration and communication, but below are a few risks you may not be considering and ways to mitigate them.

Enrollment and premium errors

Enrollment errors can come in many forms and each can have different consequences for you or your employees. These types of errors include:

An example of this are self-administered benefit plans with complicated premium calculations, such as long-term disability. These can become quite complicated when invoices are prepared internally and if the calculation isn’t being verified by management or the carrier, your client could be overpaying or underpaying disability premiums to the carrier.

While enrollment errors may happen infrequently, when they do happen, they require a lot of time to correct. So, what can you do to mitigate these risks?

Covering ineligible dependents

It’s important to ensure that client employees are aware of who they can cover with their benefits and are educated in the process. It’s equally important to ensure that there are systems in place to catch errors that may occur when employees try to cover dependents that are ineligible.

To reduce the opportunities for employees to add ineligible dependents on the plan, you can:

COBRA administration

Most often, we are relying on a third party to handle our COBRA administration. In doing so, consider who this population is — likely to include high claimants who value their coverage and are high utilizers, but are a small portion of the population. It’s worth looking at this group carefully to determine accuracy and if they’re abiding by COBRA regulations.

To ensure your COBRA administration is running soundly, consider:

Uncollected contributions

Uncollected contributions are another small population and include leave participants or employees who miss a paycheck because they didn’t work enough hours. This could represent a significant value if you’re not collecting these contributions in some manner.

To collect missed contributions in real-time, you’re going to actively look for the scenarios where there could be missed contributions due to paid or unpaid leave and properly identify any missed contributions. Once identified, bill and collect for them through either your client’s in-house process or COBRA administrators offer this as part of their services. You’d also want to make sure your client has a policy regarding employees who do not return and the procedure for transition to COBRA is handled consistently.

Make sure you’re thinking about how your clients are handling unpaid contributions and making sure they’re accounted for, so that if this situation arises you can help, and they’ll know exactly what to do about it.

ACA compliance

This was a hot topic for a few years, but now that most employers have settled into a routine with ACA, it may be taking a back seat to other issues. It’s important to remind clients, however, that this is something that should be reviewed annually to ensure they’ve got sound procedures for complying with ACA every year.

You’ll want to:

Pre-tax account forfeitures

Something we can all take for granted as long as the pre-tax program is running smoothly – it can be easy to forget there’s a lot of money at stake for the plan and individuals if they don’t adhere to the appropriate program deadlines.

Clients should pay particular attention to:

Lessons learned

It’s important to understand all aspects of the benefits program your client in running and what could go wrong so that you’re prepared to jump in and reduce the chance of an issue for your client. Assess the program as a whole and look at the benefits individually to identify the risk associated with each and how to prevent it. Know the partners that you’re working with, double check the work always, and don’t slip into complaisance with third party administrators. Compliance oversight is important, but equally important are the administration practices that ensure accuracy of enrollment, coverage and premiums. Inspire your clients to really dig in and understand their program and ensure it’s working the way it’s supposed to be and accurate all year round.

For more information on benefits administration risk mitigation, check out our recent webinar: