BENEFIT ADMINISTRATION

Transcription

1 Volume Nineteen, Issue One January 2016 BENEFIT ADMINISTRATION Many organizations are trying to comply with the new employer reporting requirements. However, even organizations using outside vendors for reporting find it difficult to supply the sheer amount of information needed for the 1095-C forms. For this reason more employers are considering new processes for administering benefits. The good news for employers is that benefit administration capabilities have improved significantly over the last decade. A number of good, cost-effective options now exist. This Advisor discusses the advantages and disadvantages of the following benefit administration options. It also provides criteria to evaluate the software choices: Internally-developed options Internal software system modules External benefit administration software options Private exchanges Key criteria to consider when reviewing options Employers must be involved in designing and implementing their own benefit administration solutions. They often think these systems will automatically coordinate with their processes. Unfortunately, systems aren t advanced enough to do that. Although launching a new benefit administration process is a lot of work, it is an investment. Putting time and energy into creating a workable system will pay dividends in the end. A new system needs to interact with the payroll system, plan vendors and internal systems. Any change creates some level of disruption, but a well-built, carefully evaluated process will save time and reduce errors. INTERNALLY-DEVELOPED OPTIONS Internally-developed systems using current administrative software are often the least expensive option. For example, most employers have payroll systems to handle payroll functions. Many of these payroll systems can track other Continued on Page 2 We welcome your comments and suggestions regarding this issue of our Benefit Advisor. For more information, please contact your Account Manager or visit our website at WORLD CLASS. LOCAL TOUCH.

2 Volume Nineteen, Issue One January 2016, Page 2 information electronically using customized fields. Employers could also access carriers remote systems to manage enrollments and midyear changes or use their own Intranet for electronic access to documents and communications. Certain rules, however, apply to delivering documents electronically. Employers need to ensure their process meets these electronic delivery requirements. Internally-developed options are often the least reliable. They can track some information on spreadsheets, but they can t accommodate all benefit administration needs. Using these systems would require entering data into a number of different systems from payroll to the carrier s system to internal spreadsheets. They are not, therefore, the most efficient way to manage benefits administration. In some cases, they limit the ability to customize benefit offerings. Some organizations may even fail to launch voluntary benefits because the administrative process would be too cumbersome. Others may have to limit their health plan offerings because their internal systems could not manage plans such as a high deductible health plan paired with a health savings account (HSA). Clearly these internallydeveloped options are cost effective, but the multiple points of data entry create opportunities for errors. Errors cost money. For example, taking incorrect contributions or failing to terminate coverage is lost money. Errors also affect the reputation of the human resources department. Organizations need to ensure they are administering benefit plans accurately. Internally administered systems increase the possibility of errors. INTERNAL SOFTWARE SYSTEM MODULES This option is also typically managed internally either by expanding the payroll system or using a Human Resources Information System (HRIS). Employers may start with payroll and then add modules to administer benefits. Their vendors may offer additional modules with functions such as time tracking, applicant tracking, review functions, certificate tracking, and other options. One of the benefits of this approach is that the modules can communicate with one another allowing employers to automate the process. The ideal set-up would require only one point of data entry. That data would then be fed into the appropriate systems. Many of these options offer internet enrollment and employee data service centers allowing employees to manage their elections and receive information. These elections trigger a number of activities. The system reviews the information for accuracy and sends it to the appropriate carriers. Enrollment triggers a number of communications events, such as sending SPDs, HIPAA privacy notices, COBRA general notices and so on. Some of these communications can be electronic; others will need to be sent by first class mail. Your system should send required communications automatically whenever possible. This process requires internal resources. All the data needs to be sent to the carriers. In general, the HRIS vendor will not manage this process. However, when you add a benefit administration module, part of the implementation process should be mapping the file format the plan vendor requires. Make sure to discuss this formatting before you purchase the system. You may be able to negotiate the cost of mapping the file format as part of cost for the benefit administration module. If you don t negotiate the price upfront, the vendor will charge programming fees to map file formats. Some of these fees can be sizable. The human resource department is the center of this approach. Although most tasks will be automatic, human resources will still need to be very involved in overseeing the process. They need to ensure the data feeds are properly set up, the system collects all the data needed for the enrollment process, contributions are properly set in the system, and the system properly triggers all required communications. If the organization offers voluntary life insurance, human resources also needs to ensure the system meets evidence of insurability Continued on Page 3

3 Volume Nineteen, Issue One January 2016, Page 3 requirements. Some carriers offer a link to their websites to enter evidence of insurability information. You need to make sure the system accurately communicates current life amounts and amounts pending approval of evidence of insurability. Human resources also must always recheck contributions for life coverage. A benefit of this approach is increased efficiency. These systems work together; payroll and HRIS feeds are typically seamless. Automating day-to-day tasks and having one point administration also reduces error rates. The cost of this approach varies. You are typically adding modules to a system that is already a part of the organization which can be cost effective. The cost can also end up being higher than expected. In many cases, customizing the system to your process involves extra programming fees. This approach does have drawbacks. Although the HRIS and payroll systems work together, the feeds to carriers and vendors do not. The data trading process needs to be developed. It requires monitoring to avoid errors or losing records during the data exchange. Typically, adding modules to an HRIS payroll system is a major project for human resources to implement. Although it has support, HR does most of the work. Also, these systems are not completely flexible. To handle a process in a different way would require expensive customizing. In addition, these customizations are typically overwritten if you adopt upgrades or newer versions of the software. These systems typically are built to handle medical, dental and vision coverage. They do not necessarily handle expansive options or voluntary benefits very well. EXTERNAL BENEFIT ADMINISTRATION SOFTWARE OPTIONS Employers might choose dedicated benefit administration software. These systems are typically more useful and more flexible than modules added to an HRIS. They also tend to be less expensive. Prices have fallen over the last five years. Benefit administration software operates independently of HRIS and payroll systems. These systems typically offer Internet enrollment and mid-year change capabilities. The data collected is limited to benefit elections and employee information. The employee signs on to the benefit administration system to make new hire elections, open enrollment elections and midyear changes. Some benefit administration vendors also offer call centers to assist employees or to enter elections if employees cannot make elections on their own. One of the advantages of these systems is that benefit administration professionals design them to be intuitive. They also tend to need less or even no customizing because their sole purpose is to administer benefits. In addition, they tend to provide more support and assistance than just configuring HRIS modules. In many cases, they will also input plan designs initially and enter year-over-year changes. Since their primary purpose is benefit administration, they tend to map the data files for your various vendors and monitor the file feeds. These systems have drawbacks as well. They do not have the broad focus of an HRIS system. They won t do payroll, manage timecards, track applicants, track training, maintain employee records other than benefit elections or communicate with HRIS or payroll systems. File feeds will need to be built for different employer systems to communicate with the benefit administration system. Also, the separate sign on protocols required can be confusing for employees. They would have to log into one system for benefit changes and possibly log into a separate system for information changes, such as changing 401(k) deductions. Finally, if a benefit advisor or a voluntary benefits carrier provides access to benefit administration system, access to your system is through that relationship. If you want to change the relationship, you will likely lose access to your benefit administration system. Continued on Page 4

4 Volume Nineteen, Issue One January 2016, Page 4 PRIVATE EXCHANGES Private exchanges could also be an option. These exchanges offer benefits as well as administrative capabilities. They also typically involve a defined contribution approach. This means employers set their contribution amount and employees pay any additional premiums needed for the benefit options they choose. A great deal of press has been devoted to private exchanges. However, the move to private exchanges has been relatively slow. Mercer s 2015 National Survey of Employer-Sponsored Health Plans indicates only 6 percent of large employers currently use a private exchange for active employees or will by next year s open enrollment. Large employers are employers with 500 or more employees. Private exchanges can be appealing. Although they offer a fixed number of benefit plans, they usually offer more than most employers offer independently. Most exchanges will not allow employers to alter the plans they offer. The price the exchange sets minus the employer s defined contribution is the employee cost. The administrative functions and decision support tools these exchanges offer are very good. They can offer high quality support tools because they limit their benefit options. Private exchanges don t eliminate all the work involved in offering health plan benefits. Employers still need to coordinate file feeds between their payroll system, HRIS and the private exchange. Some private exchanges offer only limited benefits. For example, an exchange may offer only medical and dental plan options. Employers must then manage their other benefit options outside of the exchange. Employers need to understand they relinquish control when they use most private exchanges. The exchange chooses the benefits. The employer s role can be as limited as setting the defined contribution amount. For some employers, this arrangement is ideal. It allows them to point to the exchange if employees are unhappy with their benefit options. Some employers will struggle with the lack of direct control. Most employers that are reluctant to launch private exchanges are concerned about how the private exchange will control cost. If the offerings in the exchange have an annual increase of 10 percent and an employer can only afford to increase the defined contribution by 3 percent, that cost difference is passed directly to employees. KEY CRITERIA TO CONSIDER WHEN REVIEWING OPTIONS There are many ways you can improve benefit administration. To evaluate the options, consider the following: Identify your objectives. Identifying them upfront will help you decide which systems will best meet your needs. For example, you may identify the following objectives: Internet enrollment for new hire enrollment, open enrollment and midyear changes. Call center capabilities Employer reporting services COBRA administration Data feeds to benefit vendors Determine a budget. In all likelihood, implementing a benefit administrative solution will cost money. You may be able to obtain a subsidy. If you plan to offer voluntary benefits, your consultant can often arrange subsidies through many voluntary benefits vendors to offset the cost of a benefit administrative system. Although these subsidies may decline in year two or three, they can help offset the cost of launching a new benefit administrative system. Subsidies are not offered to offset the cost of an HRIS benefits administration module. Employers that have multi-data entry points and manual benefit administration should consider potential savings that could occur when they automate their administration process. Continued on Page 5

5 Volume Nineteen, Issue One January 2016, Page 5 Review your current systems. Will limits in your current infrastructure affect your potential benefit administration options? If, for example, you currently have only a payroll system, adding an HRIS module would be very expensive. In this case, you may want to look for benefit administration software solutions. Map your current process. You need to understand how administrative tasks are being handled. This inventory will provide checkpoints on administrative functions that you will need when you look for benefit administration solutions. It will also give you the opportunity to identify other functions you would like the benefit administration system to handle. Perhaps, you have a manual open enrollment and you currently enter changes in the carrier system, the payroll system and the HRIS system. You would like to move to a process requiring only one entry. You may want to make the benefit administration system the system of record for benefit elections and employee contributions. The system of record is the authoritative source for a data element. The payroll system may electronically feed the benefit administration system basic data on new hires. The benefit administration system will collect benefit elections using information from the internet and call center enrollment. It will then feed payroll and HRIS the election and contribution information. Request a proposal from vendors. The vendor market for benefit administration systems is more developed than it was five years ago. Identify two or three vendors that provide the capabilities you need. Evaluate these vendors carefully, and pay attention to the details in these evaluations. Are they currently feeding data to your specific type of payroll system? Are they sending enrollment files to all the carriers you are currently working with? What kind of support will they provide to your organization? Review the key capabilities you need today and think about the capabilities you may need in three or four years. Try to find a solution that fits your needs today but can also grow as your needs grow. Choose a vendor and develop a launch plan. Be sure to devote the time and resources necessary to properly launch your benefit administration solution. No solution can be implemented out of the box. Be sure the administration solution meets your needs and works with your process. Implementing a new system takes a lot of work. However, the time you spend will save you time in the future. Include all your administrative folks in the implementation process. They know your current systems. It could take up to four months to launch a new benefit administration system. Test your system once it is set up to identify any glitches before you introduce it to your employees. Do not launch your new system during open enrollment if possible. Even in the best circumstances, aspects of the system may not work properly at first. If you launch the system for new hires and mid-year changes, you can fix any glitches before you open the system to all employees at open enrollment. Choosing a benefit administration system is a project. For most organizations it will be worth the investment and effort. Automating your process saves time, improves accuracy and adds consistency to your administration functions. These advantages are especially important if you have a decentralized approach to benefits administration. Continued on Page 6

6 Volume Nineteen, Issue One January 2016, Page 6 CONCLUDING THOUGHTS The reporting requirements have highlighted shortcomings in many employer s administrative processes. It takes time to look at benefit administrative options. You may want to start looking at options early in the year if you need to improve your administration process. It can take from one to three months to evaluate options and choose a vendor. It can then take up to 120 days to implement a solution. Find a solution that fits your administrative process. Work with your vendor to understand how the system operates in each step of the administrative process. Understand the flexibility you have to configure the system to align with how benefits are administered in your organization. While most organizations have the same benefit administration tasks, almost all organizations administer benefits differently. You want your system to provide the functions you need. This only happens when you are involved in setting up your solution. If you have any questions, please contact your Marsh & McLennan Agency Michigan Account Manager. MMA Copyright Marsh & McLennan Agency LLC company. This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change. Marsh & McLennan Agency LLC 3331 West Big Beaver Road, Suite 200 Troy, MI Telephone: Fax: Monroe Ave. NW, Suite 400 Grand Rapids, MI Telephone: Fax: