What is a Benefits Plan Administrator (BPA)?

A benefits plan administrator is important for ensuring organizational compliance with contractual obligations and mitigating potential liability risks. Whether you're beginning your journey in employee benefits administration or looking to refresh your understanding of an administrator's responsibilities, this post is for you.

What is an Employee Benefits Plan?

Think of an employee benefits plan (EBP) as a group benefits plan that an employer offers to its eligible employees in addition to their regular paycheck. Its purpose is to ensure the well-being of employees and help the employer attract and retain top talent.

Group insurance plans are a significant component of employee benefits, providing essential coverage and support to employees while simplifying the administrative process for employers.

An EBP can include a variety of perks, such as:

• Life insurance
• Health insurance
• Paid time off
• Disability insurance
• Retirement plans
• Flexible work arrangements
• Tuition reimbursement
• Critical illness insurance

Some employers offer a handful of basic benefits, while others provide a robust group benefits plan package that includes the basics and more, from childcare assistance and paid time off to tuition reimbursement and flexible working hours.

There are three parties involved in an employee benefits plan:

1. The employees
2. The employee health benefits provider (the organization that provides the employee benefits plan)
3. The benefits plan administrator (the person or team within your organization that manages the plan)

What is a Benefits Plan Administrator?

A benefits plan administrator is an individual or team within your company that is responsible for managing your company’s employee benefits plan. This means ensuring member enrollment completion, educating employees on plan benefits, and maintaining accurate, up-to-date employee records. A critical responsibility of a BPA is to maintain employee records, which include essential information such as personal details and changes in employment status, and ensure these records are updated promptly and correctly.

What Does a Benefits Plan Administrator Do?

Your benefits plan administrator has numerous responsibilities, including:

New Eligible Employee Enrollments

One of the most important responsibilities of your plan administrator is to ensure that new employees enroll themselves and their dependents in the program in a timely manner. Most plan providers require new employees to complete the enrollment formalities within 30 or 31 days of satisfying the waiting period, if there is one. When there’s no waiting period, a new employee should complete their enrollment within 30 or 31 days of their date of joining.

Life Events

The plan administrator is responsible for informing the insurer whenever an employee experiences a key life event. Some examples include marriage, birth of a child, divorce, death of a loved one, retirement, and starting a new job.

Employee Status Change and Records

The plan administrator should promptly inform the insurance carrier of any changes in an employee's status that affect their benefits eligibility to ensure timely enrollment. For example, if an employee’s role changes from part-time to full-time, the administrator must contact the insurance provider to add them to the benefits plan.

Terminations

Employees must be removed from the benefits plan immediately upon termination, whether voluntary or involuntary.

Benefits Continuation

An employer may choose to extend an employee's access to the benefits plan for a limited time based on the specific reasons for their departure. If this happens, the plan administrator must promptly contact the insurance provider to determine the feasibility and eligibility of such an arrangement.

Plan Communication

If any changes are made to the benefits plan, the plan administrator should inform the employees about them.

Claim Process

Ensure everyone knows how to submit insurance claims. Completing and submitting claim forms accurately and timely is crucial to initiate the claims process effectively. Some key points to keep in mind include:

• Is it possible to file a claim electronically?
• Is there a mobile app that employees can use to file a claim and check its status?
• Is health and dental coverage cashless, or must the employee cover expenses out-of-pocket and then file a claim for reimbursement?
• To whom should employees direct claim-related inquiries?

Report Changes in Earnings

Whenever an employee’s salary changes, the plan administrator should promptly notify the insurer. This is particularly important for benefits plans that offer disability or critical illness coverage, as wage increases could qualify the employee for a higher non-evidence maximum.

Review Monthly Statements

The insurer sends monthly statements, which include information such as premium amounts, terminations, enrollments, rate changes, etc. The plan administrator should carefully review and pay billing statements to ensure all changes occurring within the reporting period are accurately recorded and reflected, and that premium payments are made accurately.

Employees Approaching Retirement

When employees approach retirement age, their benefits may change, depending on the insurer. As a plan administrator, you should inform employees of any coverage changes as they near retirement.

Importance of Compliance

Compliance is a cornerstone of effective benefits plan administration. It ensures that the employee benefit plan is managed in line with relevant laws, regulations, and insurance carrier requirements. Non-compliance can lead to severe repercussions, including fines, penalties, and even the termination of the plan.

For plan administrators, understanding the importance of compliance is crucial. This involves maintaining accurate employee records, promptly reporting enrollments and terminations, and ensuring timely payment of billing statements. Compliance also means administering the plan according to the plan document and any applicable laws and regulations. This includes making sure that eligible employees are enrolled in the plan, benefits are correctly paid out, and plan members are well-informed about their benefit coverage.

By prioritizing compliance, plan administrators can manage the employee benefit plan more effectively and efficiently, ensuring that plan members receive the benefits they are entitled to.

Plan Administrator Liabilities and Risks

Being a plan administrator comes with its share of responsibilities and potential liabilities. Errors or omissions in plan administration can lead to significant issues, such as failing to update employee information, incorrectly processing enrollments and terminations, or not communicating excess and conversion coverage options to employees.

Plan administrator liability coverage can offer protection against these risks, but it’s essential to understand the potential liabilities involved. This includes a thorough understanding of the plan document, relevant laws and regulations, and the insurance carrier’s requirements.

Common risks and liabilities in plan administration include:

• Inaccurate employee records, which can lead to incorrect benefits payouts or plan terminations.
• Failure to report enrollments and terminations, resulting in incorrect billing statements or plan premiums.
• Late payment of billing statements, which can incur late fees or lead to plan termination.
• Not informing employees about excess and conversion coverage options, causing them to miss out on important benefits.

By recognizing these risks and liabilities, plan administrators can take proactive steps to mitigate them, ensuring the employee benefit plan is managed effectively and efficiently.

Why is a Benefits Plan Administrator Important?

A benefits administrator streamlines employee benefits management, saving time, reducing errors, and improving the employee experience. Here are some reasons why a benefits plan administrator is important:

• Ensures Compliance: A benefits administrator ensures contract compliance and mitigates legal risks through meticulous record-keeping.
• Reduces Errors: A plan administrator ensures benefits are properly managed, thereby reducing errors and improving the employee experience.
• Keeps Employees Informed: A plan administrator ensures each participant understands the details of their benefits package.
• Help During Claim Filing: A plan administrator answers any queries that an employee may have regarding filing a claim.

Conclusion

If you offer a benefits package to your employees, you need to appoint a benefits plan administrator. The plan administrator is responsible for managing and maintaining your employee benefits plan on a daily basis. By efficiently handling enrollment, claim filing, and other related tasks, plan administrators streamline operations, minimize errors, and ensure a seamless benefits experience for both employers and employees.

Looking for help with finding the right group health insurance plan? Reach out to a Dundas Life licensed advisor today.

FAQs

Do I Still Need Life Insurance If My Workplace Has a Benefits Plan?

Typically, life insurance is included in your employee benefits plan, but it may still be a good idea to buy personal life insurance. Group life insurance is often capped at low amounts, such as one or two times the annual salary. For example, if you make $80,000 a year, the maximum coverage available through work is unlikely to exceed $240,000. If you have a mortgage or young kids, this may fail to provide adequate financial protection. Personal life insurance can supplement your group life insurance policy and fill in the gaps in its coverage. Consult a life insurance expert to find out how much additional life insurance coverage you need and which type of life insurance policy—term, whole, or universal—is right for you.

Are My Family Members Included in the Coverage?

Most employee benefits, such as health and dental coverage, are extended to your direct family.