4 Pitfalls of Benefits Administration - Zupnick Associates

(by Elton Mwangi)

Benefits administration is more than offering your employees health insurance, healthy snacks, or casual Fridays. It also involves creating, managing, and updating a company’s employee benefits program.

A successful benefits program has benefits that align with the needs and goals of the team members. The current generation is struggling with student debt, and therefore, student loan repayment would be a great benefit for them.

However, there are drawbacks in every system, and employee benefit plans are not the exception. Learn some pitfalls seen in the administration of employee benefits.


1. Poor Communication of Coverage Options

One thing poor communication does is increase frustration – and not just in romantic relationships. If you don’t properly communicate the benefits package effectively, your employees will engage poorly. 

From terminologies like HDHP, PPO, and HMO to concepts such as tax treatment of employee contributions and qualifying expenses, your staff can end up stressed as they don’t know what benefits will suit their needs.

Communicating to employees is also the first step to compliance.

For instance, all plans subject to ERISA have disclosure requirements like distribution of a Summary Plan Description and other notices. COBRA also has communication requirements such as an initial notice and notice of early termination.

That’s why employers should have a benefits communication strategy for connecting team members to their benefits plan. It would help to regularly educate them about these plans’ financial and health benefits. Be sure to use a variety of communication channels, such as social media, emails, and activities.

Create Incentives 

Promote open communication if you want to motivate your employees to engage with their employee benefits packages efficiently. Tremblay has been successful with quizzes, and Bluebridge Digital employed a scavenger hunt and ice cream to get their staff to interact with their new mobile human resources app.


2. Not Keeping Your Benefits Package Relevant

During the pandemic, the workplace has shifted to a more hybrid model, and some employers have not changed their benefit plans to reflect this shift. This has resulted in unused benefits that are not relevant to the current workforce.

Employees, especially the GenZs, are looking for:

  • mental health days
  • flexible schedules
  • other benefits that foster employee health, wellbeing, and productivity.

Parents want:

  • child care stipends
  • flexible hours
  • college savings assistance
  • emergency daycare
  • parental leave

You know your benefits package will not be relevant to your team if you didn’t consult them before implementation. It’s not inclusive as it does not consider employees’ ages, lifestyles, and circumstances.

Moreover, over the last 20 years, job satisfaction has been going down due to irrelevant benefits and compensation. Employers have been quick to turn to employee benefits when cutting back on expenses. This has resulted in employers not offering relevant benefit plans as it would be too costly.


3. Not Knowing Your Employees Well

Most insurance plans have eligibility criteria like marital status and age limits. For instance, a life insurance policy may stipulate that a dependent child is under 26 years. If they surpass the age, the policy terminates – and you should be able to talk them through it at the appropriate time. 

More instances of how important it is to know your employees and their struggles well:

  • In the case of an employee divorcing, there’s an automatic termination of the life insurance coverage of the spouse.
  • Keep track of is your employees’ age. As they grow older, their life insurance premiums go up.


4. Trying to Manage Benefits In-House

Managing employee benefits in-house is not a walk in the park. It comes with support tasks such as selecting vendors, answering employee inquiries, educating the staff, shuffling paperwork, processing claims, and being up to date with federal and state laws and regulations.

If you fail to comply with legal requirements, you’ll get lawsuits, penalties, and fines.

That’s why you need expertise and subject matter knowledge that’s too expensive to hire internally, especially for small organizations.

Big organizations also avoid in-house benefits administration as outsourcing can reduce administration costs and allow their HR staff to focus on strategic matters and core business.

What’s more, you need someone to stay on top of the Affordable Care Act, which has its complexities that require an organization dedicated to managing benefits.



Numerous facets go into the engine that keeps effective benefits programs running. An effective program has positive effects such as increased retention, high productivity, low absenteeism, and more.

It’s paramount that businesses develop benefits that are relevant to their workforce and communicate these benefits to them regularly. Employers also need to know their employees well, to ensure they offer the right benefits and pay correct premiums, and most importantly, outsource this work to expert organizations.

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