The Ultimate Guide to Benefits Administration for Small Businesses

To compete for top talent, effective recruiting strategies are essential – especially for small and mid-sized businesses. A comprehensive employee benefits package should be part of that strategy. Why? Because it positions you to attract qualified candidates and helps you to retain talented workers who contribute to the long-term success of your business. It's a powerful tool that can give you a competitive edge in the talent market.

To ensure the successful implementation of a comprehensive benefits package, you also need an employee benefits administration program – one that runs like a well-oiled machine. After all, according to the U.S. Department of Labor's Bureau of Labor Statistics, employee benefits accounted for almost 30 percent of total private industry employer compensation costs in 2025. That means you've got a lot invested in your employee benefits program.

Administering an employee benefits program requires extensive knowledge, diligence, and a keen attention to detail. An unintentional misstep could result in monetary penalties and, potentially, litigation. In short, it's essential to have an employee benefits administration team in place that has the education, training, and experience required to manage your program efficiently and effectively.

Employee benefits administration is the process of providing and managing benefits that a company offers employees in addition to regular salaries and wages – such as health insurance, retirement plans, vacation time, paid time off (PTO), wellness plans, and more.

Employee benefits administration can be managed by a human resources (HR) department or administrator or a third party, such as a professional employer organization (PEO) company.

Primary responsibilities of the employee benefits administration function include:

• Developing a benefits program and shopping for plans.
• Coordinating with benefits providers.
• Communicating information (often) about the program to employees.
• Facilitating new employee benefits onboarding processes and open employee benefits enrollment periods.
• Managing the program's components and implementing new benefits or providers as needed.
• Assessing employees' eligibility for benefits.
• Maintaining the program's compliance with various local, state, and federal regulations.

More and more employees choose to remain with employers—or seek new employment—based on their employee benefits offerings. This highlights the importance of implementing a dynamic and well-run employee benefits program that meets employees' needs.

"Less turnover means fewer interruptions to business operations, fewer costs of hiring, onboarding and training new people and a consistent staff for consumers," according to Forbes Advisor's “What Is Benefits Administration? (2024 Guide)” by Kimberlee Leonard. “On top of loyalty, employers are able to find better employees because they offer a benefits program. Prospective employees consider the benefits package to see if it meets their needs. In some cases, prospects will take a position with a slightly lower wage if it has a better benefits package compared to other companies."

The traditional employee benefits package managed through employee benefits administration typically includes medical insurance, ancillary benefits (dental, vision, life insurance, disability insurance), and retirement or pension contributions.

Many employers also include "non-traditional" quality-of-life benefits that enhance or support employees' lives outside the workplace. Examples include:

• Employee Assistance Programs (EAPs), which provide counseling services and support employees' mental health and wellbeing
• Tuition reimbursement programs
• Health Savings Accounts and Flexible Savings Accounts
• Subsidized childcare options
• Paid leave including holiday, personal, sick, caretaker, maternity/paternity, disability, and bereavement
• Education benefits such as company-provided training, tuition assistance, and professional development support
• Wellness programs with on-site exercise classes or employee-driven challenges
• Financial wellness classes
• Telemedicine/virtual care options
• Hybrid or remote work arrangements

It can be challenging for business owners to keep pace with the fluid nature of small business benefits requirements – including what they are required to provide employees and in what capacity. Health insurance is often the first benefit that comes to mind because it is a big-ticket, core benefit and is viewed by many existing and prospective employees as a deciding factor when choosing where they want to work.

One of the most common questions we hear from small business owners is: When are we required by law to provide healthcare coverage for our workers?

Under the provisions of the Affordable Care Act (ACA), also known as Obamacare, businesses that employ more than 50 full-time employees are required to provide healthcare insurance that meets certain minimum standards to full-time employees.

Businesses with 50 or more full-time and full-time equivalent employees that don't offer insurance that meets minimum standards may be subject to a tax payment called the “Employer Shared Responsibility Payment.” That tax payment (or penalty) in 2024 is $2,970 per full-time employee, after excluding the first 30 full-time employees, according to the Society for Human Resource Management (SHRM).

Additional ACA requirements include:

• 90-day maximum waiting period: If you offer health insurance to your employees, you must offer it to all eligible employees when they become eligible for health coverage.
• Summary of Benefits and Coverage (SBC) disclosure rules: Employers must provide employees with a standard "Summary of Benefits and Coverage" (SBC) form explaining what their health plan covers and what it costs.
• Flexible Spending Accounts (FSAs): Employees can't contribute more than the annual dollar limit set by the IRS to their FSAs; however, that limit doesn't apply to employer contributions to the employees' FSAs.
• Workplace wellness programs: The Affordable Care Act creates incentives to promote employer wellness programs and other activities that support healthier workplaces.
• Reporting information on health coverage: Employers required to provide healthcare coverage must report that they provide health coverage to their employees.

Note: According to the Internal Revenue Service (IRS), employers with fewer than 25 full-time employees may qualify for the Small Business Health Care Tax Credit to help cover the cost of providing coverage.

Your employee benefits administration team can take proactive steps to navigate ACA requirements to make sure your business remains in compliance with the law, including:

• Ensuring your company offers health insurance plans compliant with ACA regulations governing minimum coverage requirements and affordability.
• Implementing necessary preventive measures to avoid costly penalties.
• Monitoring hours worked by part-time and variable-hour employees.
• Meeting reporting requirements, which includes maintaining information needed to complete Internal Revenue Code Sections 6055 and 6066 forms.

Four primary types of employee benefits administration options are available to help small business owners manage their employee benefits programs and meet all small business benefits requirements. These include:

• A benefits broker or advisor
• An administrative services organization (ASO) that offers benefits
• A professional employer organization (PEO)
• An in-house employee benefits administrator

Let’s dive a little deeper into each:

1. Benefits broker/advisor/consultant professionals provide products (broker), advice (advisor) and services (consultant) to employers. According to Indeed.com, a benefits broker is a licensed insurance professional who specializes in creating benefits packages tailored to an organization’s needs. The range of benefits can vary by broker, with some specializing in primary benefits, such as health insurance, and others offering additional services, such as employee assistance programs and education-based assistance benefits.
2. An administrative services organization (ASO) is a company that contracts with employers to provide administrative and human resources services. It is an HR outsourcing partnership in which employers pick and choose from several services, including benefits administration, allowing them to essentially build their offering from an a la carte menu of available services.
3. A professional employer organization (PEO) is also an HR outsourcing model that functions as an administrative partner, taking on human resources, payroll, benefits administration, and compliance responsibilities. The difference is when you partner with a PEO, you enter into a co-employment relationship where the PEO handles all HR-related tasks. And because PEOs become the employer of record for their clients’ employees, they can pool employees from their entire client base – giving them the ability to access health insurance plans at lower rates as well as dental, vision, life insurance, telehealth, and mental-health offerings.
4. An in-house employee benefits administrator is an employee who is often part of a business’s in-house HR team and hired to manage the day-to-day operations of its benefits program. The administrator also has overarching responsibilities, such as maintaining the business’s compliance with applicable laws that govern benefits, auditing and investigating benefits offerings, and revamping the program as needed.

Employees – especially those working for small to mid-sized businesses – often wear many hats, particularly when carrying out HR tasks. And it can be challenging for these smaller businesses to hire the staff required to manage the entire scope of services efficiently.

Without a dedicated focus on the importance of benefits administration, you could face hurdles and roadblocks that put your employees – and business – at risk, such as:

• Employees in other positions tasked with administering benefits may become frustrated or make mistakes due to a lack of time or knowledge to carry out those tasks accurately.
• Inadequate communication with employees about their benefits can lead to low participation rates, frustration, and higher costs due to incorrect utilization of benefits.
• Incomplete or inaccurate recordkeeping procedures could result in employees experiencing difficulties accessing benefits, such as healthcare insurance coverage. This could also put your business at risk of fines and penalties if you violate regulatory requirements.
• Limited knowledge of benefits options and strategies could prevent your business from accessing plans with the network and coverage that your employees need at reasonable rates. For example, some retirement plans or healthcare insurance options are not available to businesses that do not have a minimum number of employees to meet their requirements.
• HR employees juggling multiple tasks can find it challenging to stay on top of ever-changing laws, rules and regulations related to employee benefits. Without the right processes and systems to help mitigate your risk of non-compliance, your business could face penalties and, worse yet, damage to your reputation.
• New and existing employees want their employer to provide benefits that focus on their health and wellbeing. If they view their benefits package as inadequate, or benefits administration as inefficient and time-consuming, it could negatively affect your business’ recruiting efforts and employee retention rate.

“If your competitors’ offerings outshine yours, you’ll have a harder time attracting and retaining top talent,” according to Business News Daily’s “How Benefits Administration Can Help Your SMB” by Andrew Martins.

The secret to successful small business benefits administration lies in implementing core processes that nurture your workforce needs, maintain legal compliance, and focus on your business's bottom line.

The following are six tips that can help you establish a robust foundational employee benefits administration system, so you can overcome any challenges you may encounter along the way:

1. Start by assessing your employees' needs and your business budget. This step is crucial – whether you're designing a new benefits program or evaluating an existing one. Regularly ask your employees about the benefits they need and want. If there are benefits that are underutilized, consider replacing them. Can your employees easily find doctors in the network? If not, it might be time to find new plans. Simultaneously, evaluate your business' budget to identify opportunities and constraints.
2. Create your benefits package. When building your benefits package, focus on core benefits such as healthcare insurance and a retirement plan. According to The Ascent, approximately 56% of small businesses provide healthcare insurance, so offering that helps you maintain a competitive edge. Then, consider voluntary benefits such as life, voluntary disability, accident and critical illness insurance plans, and quality-of-life benefits, such as an EAP. If you are concerned about securing affordable, higher-quality plans or more plan options, consult an HR broker/advisor/consultant or a PEO, like G&A Partners. They can help you access no- or low-cost options to make your benefits package compatible with your employees' needs.
3. Manage your benefits process. Implement an employee benefits administration process that covers everything from onboarding to offboarding (and beyond). Ensure consistency in day-to-day benefits administration tasks using HR technology that integrates your benefits and payroll systems so deductions are calculated and automatically deducted each pay cycle.
4. Keep your focus on benefits compliance. It's crucial to keep up with the ever-changing landscape of employment laws and regulations that pertain to your business' benefits requirements and responsibilities. If you find it challenging to do this in-house, consider seeking help from HR compliance experts. They can assist you in staying on top of local, state, and federal laws and legislation and help you comply with regulations that apply to your company and employees.
5. Elevate your open enrollment program. During annual benefits open enrollment, your employees make important decisions about health, dental, and life insurance, as well as ancillary or voluntary benefits. Carefully plan and develop a comprehensive open enrollment process and provide education and resources to help your employees choose the right plans and utilize their benefits properly.
6. Communicate consistently about your benefits package. Providing employees with consistent, user-friendly information helps them understand which benefits options are best for themselves and their families. Use simple language when describing benefits and create targeted content that explains how benefits relate to different employees' lifestyles (single, married with children, near retirement, etc.). Distribute information through various methods and forums, including emails, webinars, one-on-one meetings with benefits counselors, office-wide meetings, interactive decision support tools, and videos. Make sure employees know who they can go to for answers to their questions regarding your open enrollment period and benefits offerings.

Benefits administration in HR can be a time-consuming job. It involves repetitive administrative tasks, intricate compliance responsibilities, ongoing benefits plan development and maintenance, and crucial employee communication and educational efforts.

If you are deciding between outsourcing your employee benefits administration functions or keeping them in-house, consider these questions:

• Is employee benefits administration taking up too much of my (or my employee’s) time? Could that time be better allocated to other workplace responsibilities?
• How involved do I want to be in benefits administration?
• Are there automated software/hardware packages I can purchase to run benefits administration processes, and if so, do I have proper administrative and IT support to manage these systems?
• How do costs compare between outsourcing benefits administration, hiring an employee to manage the process, and overhead costs associated with administering required tasks?
• Can I (and my employees) keep up with compliance-related educational, administrative and legal responsibilities?

While compliance is often the most important driver of benefits outsourcing, additional advantages of outsourcing employee benefits administration include:

• External partners that have knowledge and expertise in the area
• Your staff can focus more on key business and less on complicated administrative tasks
• Lessened burden on internal administrative staff
• Cost efficiencies
• Enhanced integration across multiple benefit areas

Your business has several options if employee benefits outsourcing is a consideration.

If you are concerned about the countless responsibilities associated with benefits administration for small businesses, you have options. By partnering with a professional employer organization (PEO), you can access expert benefits administration support and insurance plans at lower rates, including health, dental, vision, life insurance, telehealth, and mental-health offerings.

Here are some key benefits of partnering with a PEO:

• Access to high-quality, affordable employee benefits: By pooling employees from all of their client companies, PEOs, like G&A Partners, can leverage economies of scale to negotiate better rates and terms for employee benefits. This means you can access affordable, Fortune 500-level employee benefits, typically only available to larger organizations. This helps you attract and retain top talent.
• Peace of mind with expert compliance guidance: By staying on top of ever-changing regulations, a PEO can provide expert guidance to help your business meet all legal requirements related to the employee benefits you are required to provide employees and those you choose to offer employees.
• Improved recruitment and retention: A PEO can help you streamline your recruiting process, improve employee satisfaction through better HR management, and offer competitive benefits packages – all of which contribute to a more robust workplace culture that attracts and retains top talent.
• Streamlined operations: Access to a team of dedicated experts allows you to free yourself from the burden of HR tasks and focus on your core business.
• Cost savings associated with outsourcing benefits administration. According to the National Association of Professional Employer Organizations (NAPEO), PEO clients' expected return on investment (ROI) is 27.2 percent annually. An ROI of 27.2 percent means that for every $1,000 spent on PEO services, an average client would save $1,272, yielding a net (cost savings) benefit of $272 for every $1,000 spent.

G&A Partners' team delivers turnkey employee benefits administration services, including, but not limited to:

• New hire enrollments: We send enrollment materials to eligible new hires and coordinate enrollment in their elected plan options.
• Terminations: When a worker terminates employment, we execute the necessary steps to conclude the employee's coverage so your company doesn't incur unnecessary carrying costs.
• COBRA administration: We manage COBRA details from initial enrollment through status and life event changes until termination of your employee's coverage.
• State continuation administration: We oversee state continuation activity involving status and life event changes through termination of employment.
• HIPAA compliance: We coordinate and distribute HIPAA initial rights notifications.
• Section 125: We provide access to Section 125 benefits.
• Invoice reconciliation: We oversee the payment and reconciliation of your invoices to ensure the appropriate collection of employee benefit contributions.
• 401(k): We offer your company access to a low-cost, open-architecture, no-load 401(k) plan, implement and administer it, and serve as its fiduciary, if needed.