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Employee Benefits Administration: How To Manage Benefits Effectively

  • Employee Benefits
  • Article
  • 6 min. Read
  • Last Updated: 09/13/2023

manager performing employee benefits administration on her computer

Table of Contents

Implementing employee benefits is a key element in boosting employment satisfaction and engagement with your workforce. Nationwide labor shortages have changed many businesses' hiring and retention strategies, shifting benefit packages from a nice-to-offer to a must-offer. In response to this, organizations have increased the benefits they're offering by an average of 22% compared to the year before the COVID-19 pandemic, according to the 2022 Paychex Pulse of HR Survey.

With employee benefits packages becoming increasingly necessary to stay competitive, benefits administration software is critical for effective, ongoing management of these offerings. Read on to learn about what benefits administration is, what implementation of this software looks like, and how to improve employee benefit management at your business.

What is Benefits Administration?

Benefits administration is the process of creating, developing, managing, and updating the benefits program that an organization offers its employees. Once an employer has selected benefits to offer, many businesses will choose to use benefits administration software to help them execute ongoing benefits management tasks in a more streamlined way — benefits reporting, communicating to employees, conducting audits, etc.

What Does an Employee Benefits Administrator Do?

An employee benefits administrator is usually an employee within the organization who is responsible for managing employee benefits on an ongoing basis. The benefits administrator's responsibilities can include auditing current offerings, investigating new benefits, and supervising and monitoring the day-to-day operations of benefits programs, such as:

What is the Employee Benefits Security Administration?

One of the most important responsibilities a benefits administrator must take on is being knowledgeable about applicable laws that govern health, retirement, and other benefits. This includes benefits compliance enforced by the Employee Benefits Security Administration (EBSA), an agency of the Department of Labor. The EBSA is responsible for protecting the benefits of about 152 million participants in employer-sponsored retirement and health benefit plans, according to the U.S. Government Accountability Office (GAO). This includes assisting workers in understanding their rights, protecting their benefits, and facilitating compliance by plan sponsors, plan officials, and service providers.

Part of EBSA's enforcement includes focusing on retirement and health plan compliance with the Employee Retirement Income Security Act of 1974 (ERISA), which establishes minimum standards for employee benefit plans. A benefits administrator must ensure, among many other things, that benefits plan information is disclosed to employees in a manner consistent with policies enforced by EBSA.

What is Employee Benefits Administration Software? Key Features and Capabilities

Benefits administration software is often defined as meeting the following criteria:

  • Provides a centralized administrator dashboard.
  • Allows access to a marketplace of insurance carriers.
  • Offers an employee benefits portal so employees can access benefits plans, update their information, and enroll.
  • Let administrators create compensation statements.
  • Includes built-in compliance checking and reporting features.

Additionally, there are three other key pieces when it comes to benefits administration software: reporting, security, and transparency. If you're offering health and wellness benefits, benefits administration software can help make these tasks easier for you and your employees, plus more compliant for your company.


Most benefits administration software lets HR create customized benefits reports. These reports can be a big help when it comes to streamlining your benefits process and sharing data with organizational leaders. More specifically, they can help you:

  • Detect benefits changes during a particular payroll period.
  • Make it easier to audit a monthly medical insurance bill and help make sure your company and/or employee aren't accidentally charged for something that wasn't used.
  • Decide how you might want to expand or change your benefits package for the upcoming year.


A manual benefits enrollment process can make it difficult for companies to keep things secure. After all, we're talking about forms that include Social Security numbers, home addresses, and other critical personal information. With benefits administration software, security features include:

  • Secure storage for personal and/or sensitive employee information.
  • The ability for administrators to set criteria to allow employees to only see data relevant to them.


When an employee submits a benefits request that needs to be approved, your benefits administration software will make every step of the process traceable, which can help minimize issues that might come up later. Specifically:

  • You and employees will have access to information that the benefits provider shares. This can help keep everyone on the same page and avoid miscommunication.
  • This level of transparency can also help explain things like benefit contribution requirements. When this information is easy to find, it can help you catch errors, or resolve issues related to an employee's coverage.

Steps in Benefit Administration

Audit Your Benefits Package

Offering benefits to your employees is a balancing act between meeting employees' needs and staying within your budget. From time to time, it's a good idea to audit your current offerings and review where things stand in this area. While federal law doesn't require small businesses to offer most types of benefits, many choose to offer additional perks to both help their employees as well as to stay competitive in the labor market. Here are key types of benefits you may want to consider:

Health care benefits: For smaller budgets, consider health savings accounts combined with qualified high-deductible health plans. Also, look at flexible spending accounts for eligible medical expenses, which do not require any employer contributions.

Retirement savings: Help employees save for their retirement by offering a qualified retirement plan. You can do so with no significant cost to you (e.g., 401(k) plans without any employer contributions). A tax credit may also be available for the administrative costs of setting up the plan and educating employees about contributions.

Training: You can pay to train employees on the job or enable them to take education courses outside of work. By setting certain parameters, you can arrange for this benefit to be tax-free to employees.

No-cost benefits: Perhaps the best types of benefits you can offer have no associated costs. Consider offering perks such as flex time, permitting employees to work some or all of the time from home, or other work arrangements that allow workers to better manage their work/life balance.

Provide Notice

Offering certain benefits requires you to give certain notice to employees. This notice allows them to opt out in some situations or to take advantage of the offering in others. Examples:

  • Safe harbor 401(k) plans: Requires a notice to be distributed 30-90 days in advance of the plan year, outlining rights, obligations and certain minimum benefits, as well as the timing and method for making salary deferral elections.
  • Qualified small employer health reimbursement arrangements (QSEHRAs): At least 90 days before the beginning of the year, notice must be furnished to eligible employees that states the permitted benefit and coverage requirements to maintain eligibility.

Withhold Appropriate Taxes

Staying up to date on tax withholding is another important facet of employee benefits management, as some benefits are subject to payroll taxes, while others are exempt. Be sure to factor in the correct status when reporting on:

  • Employees' W-2s
  • Quarterly employer tax returns (Form 941)

It's also important to ensure that you:

  • Permit employees to submit a revised Form W-4, which allows them to increase or reduce their withholding.
  • Adopt appropriate withholding rates for supplemental wages (e.g., bonuses). The 2023 rate is 22% if you choose to withhold separately and not combine the supplemental wages with regular wages. The withholding rate on supplemental wages exceeding $1 million during a calendar year is 37%.
  • Determine reimbursement status. If you reimburse employees for certain costs under an accountable plan, the reimbursements aren't compensation; there's no withholding. But if it's a nonaccountable plan, you must withhold taxes accordingly.

Establish a Benefits Communication Plan

Traditionally, companies communicate with their teams about benefit plans once or twice a year, usually during annual open enrollment periods and performance reviews. HR departments play an essential role in communicating benefits' value to employees by raising awareness and providing insight into how programs can be used.

But occasional communications aren't sufficient. It may lead to the perception among employees that benefits really aren't a priority within the organization. Developing and executing a plan for ongoing employee communication can help cultivate favorable perceptions that drive strategic business goals.

Employee Benefits Communications Plan Best Practices

If you don't have an employee benefits communication plan in place, here are some guidelines to keep in mind as you prepare to notify employees of benefit changes:

Communicate frequently: You can't over-communicate news about employee benefits. Regularly schedule updates to employees, even when nothing much seems to be happening. Make use of your benefits administration platform to produce information of genuine value. Topics for these updates might include tips from benefit providers and employee benefit success stories.

Consider sending out value-added messaging over the course of the entire year. These messages should:

  • Be easy to understand.
  • Take little time to read while creating real value for employees.
  • Avoid the alphabet soup of acronyms common in today's benefits literature.
  • Foster positive impressions regarding workplace benefits.

Examples of effective communications include spotlights on optional benefits programs such as pet insurance, tips from benefits providers on how to make the most of a program, and employee success stories.

Get started ASAP: When it's clear changes in benefits are imminent, begin preparing your presentation to employees. Rumors can take on a life of their own, and once they get started, it's hard to conduct damage control. At the same time, be sure to have all the facts in place before making any official announcement. If a new plan is going to be implemented, you'll want to answer employee questions as clearly as possible.

Frame the message in a positive light: Employee reactions will depend on how favorably you frame the message about changes in benefits. For example, if you are canceling an established plan, your company should make clear you aren't cutting benefits across the board. Instead, you may want to communicate that you are providing access to improved benefits that have been chosen with employees in mind.

Don't cloud the message with industry jargon: The areas of health insurance and other employee benefits can be cluttered with insider jargon. Many employees don't know the terminology, so including these terms in your message can increase confusion and uncertainty, rather than reduce them. Strive for clarity at every point and if you must use industry terms, explain exactly what it means.

Tailor your communications efforts: Your workforce is most likely composed of different demographic groups, with unique benefits concerns at each individual's life stage. One group might value information regarding time off or flexible work schedules, while another might value detailed information about retirement options. Tailor your communications to fit your specific business strategies. Consider developing unique content streams with collateral and communications targeted to different groups, such as college recruits or senior executives.

Use all distribution channels at your disposal: You can't always be sure how employees receive important information, so it's a good idea to "use a variety of methods to reach employees, such as videos, blogs, social media, town hall meetings, lunch-and-learns, and benefits fairs," says Paychex HR services human resources coach Kirsten Tornow. "Some workers tend to appreciate more face-to-face enrollment meetings, while other workers may prefer getting details on their devices, with important information delivered in short, concise bites."

Consider the following avenues:

  • HR portal: This channel can promote self-service access, automated notifications, news postings, and online tools that are spotlighted every time an employee logs in.
  • Mobile devices: Share information with messages optimized for smartphones, tablets, and text messaging for employees who have opted into this communication method.
  • Electronic: Reach out to remote workers and multiple offices through email notifications, videos, and online satisfaction surveys.

You may also want to offer printed materials as well as online resources. Producing easy-to-read printed pieces can be very helpful, particularly those pieces that offer side-by-side comparisons of:

  • Premiums, projected employee contributions, and/or deductibles.
  • Lists of in-network and out-of-network medical facilities and consulting physicians.
  • Changes in plan offerings for the upcoming year as compared to the past year.

Try to anticipate the kinds of questions employees will ask and include detailed FAQs with this printed piece (a PDF version on your company's intranet can also help).

How Can Employee Benefits Administration Software Help Your Business?

Benefits administration software can help you and your organization stay balanced while you focus on the moving parts. Although federal law doesn't require that small businesses offer certain types of benefits, most companies offer health care and wellness benefits to support employees and attract job seekers. And when you use benefits administration software, it can be much easier and more secure to administer benefits packages and encourage employees to use their benefits.

For instance, benefits administration software can:

  • Help you facilitate open enrollment easier than a paper system. Most benefits administration software includes an administrative dashboard that lets you view and adjust benefits packages when needed.
  • Give employees control over making claims and allow them to update their information.
  • Help you stay compliant with federal and local regulations, such as those related to the Affordable Care Act (ACA), the Health Insurance Portability and Accountability Act (HIPAA), and others.

Another major advantage of employee benefits software is that it includes features such as employee portals and self-service menus, which give employees more control over making updates and changes such as:

  • Personal information updates.
  • Switching or adding on coverage options during open enrollment, or at other times when they've had a qualifying event, such as a change in their family status.
  • Basic changes around their personal information such as a new phone number or mailing address, freeing up time and resources that would otherwise fall on your HR team's plate.

Stay Competitive and Alleviate Administrative Burdens with Benefits Software

Just as important as establishing attractive employee benefits is administering them effectively. Luckily, benefits administration doesn't have to be overwhelming. You can easily manage all your offerings from one place via employee benefits administration software. This technology provides a holistic view of your company's benefit plans, helping improve productivity, communication with employees, and your ability to make well-informed business decisions related to your employee benefits plan strategies. Learn more about how your business can handle employee benefits administration more simply and with less hassle.

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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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