Administering payroll, benefits, time and attendance cost mid-sized employers $2,000 per employee annually, according to a 2011 PricewaterhouseCoopers study. Commissioned for payroll provider ADP, the study found that large employers typically paid a bit less, at $1,400 per employee per year. It’s no wonder that many employers turn to third-party administrators.Some employers choose to outsource all or a portion of these functions. If you’re interested in using a third-party administrator for your benefits program, the following suggestions can help you find a quality vendor and avoid compliance problems.
- Make sure the company is licensed to work in your state. You can get this information through the secretary of state’s office.
- After you confirm licensing, check the company’s customer list. Some third-party administrators specialize in large businesses, while others focus on small business, nonprofits, or companies that employ organized labor. You’ll save time and money by confining your search to companies that specialize in your type of organization.
- Consider the services offered by the third-party administrator. Many offer unbundled, or cafeteria, plans that let you choose only the services you want. Unbundled services give you more flexibility, but TPAs often offer significant discounts if they can service your company in more ways than one.
- If you want the TPA to provide retirement planning, ask for a proposal detailing the different types of plans that would be appropriate for your organization, and make sure it explains all of the details, both positive and negative, of each plan.
Your final decision will revolve around how much control you’re willing to relinquish. Some employers do not want to be involved in any aspect of administering employee insurance and retirement plans. Others want more control. Third-party administrators are generally flexible in this area, but it is important that you and the administrator are on the same page before signing what will likely be a long-term contract.