Benefits administration is the work of running employee benefits: enrolling people, keeping deductions and carrier records in sync, handling life events and meeting deadlines. Most of the money lost in it is lost in reconciliation.
| When | Task | Common failure |
|---|---|---|
| New hire | Eligibility date, enrollment form, summary plan description | Missed eligibility date |
| Life event | Process changes within the plan window | Form arrives after the window |
| Monthly | Reconcile carrier invoice with payroll deductions | Paying for people who left |
| Termination | End coverage, send COBRA information | Coverage left active |
| Annual | Open enrollment, ACA reporting where it applies | Late or incomplete elections |
A manufacturer pays a monthly health invoice of about $40,000 and never compares it with payroll. During a review, HR lines up the carrier’s list of covered employees with the payroll deduction report.
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Three employees who left two months earlier are still on the invoice. At a plan cost of $620 a month each, that is 3 times 2 times $620, or $3,720 paid for coverage nobody had. One current employee has coverage on the invoice but no payroll deduction, so the company has been paying her share as well.
HR sets up a monthly 30-minute reconciliation with one rule: every name on the invoice must match a name with a deduction, and every termination triggers a coverage end date the same week.
Federal COBRA continuation coverage applies to most group health plans. Under 29 USC 1161(b), it does not apply to a plan for a calendar year if all employers maintaining the plan normally employed fewer than 20 employees on a typical business day during the preceding calendar year. Many states have their own continuation rules for smaller employers, so check the rule in your state.
When it applies, the clock starts with the qualifying event. For events such as termination or a reduction in hours, the employer must notify the plan administrator within 30 days (29 USC 1166(a)(2)). The administrator must then notify the qualified beneficiary within 14 days of receiving that notice (29 USC 1166(c)). Where the employer is also the plan administrator, the regulation at 29 CFR 2590.606-4(b)(2) allows up to 44 days.
A 60-employee logistics company adds three steps to its termination checklist: record the qualifying event date, notify the plan administrator the same week, and set a calendar reminder for day 25 to confirm the notice went out.
In the following year it processes 14 terminations and 3 reductions in hours that affect coverage. Every one is notified to the administrator within 10 days. Before the checklist, the company could not show when notices had been sent for the previous year’s separations.
Eligibility, enrollment, life events, payroll deductions, carrier reconciliation, COBRA notices and annual open enrollment.
In small companies, often HR or the owner, sometimes with a broker, a PEO or benefits software.
For an ERISA plan, within 90 days after the employee becomes a participant.
Monthly. Errors compound when they go unnoticed.
Federal COBRA generally does not apply when all employers maintaining the plan normally had fewer than 20 employees on a typical business day in the prior year. Many states have similar continuation laws for smaller employers.
The plan administrator, which can be the employer itself or a third party. The employer must tell the administrator about qualifying events like termination within 30 days.
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