More Firms Outsource Benefits Functions

Over one-third of companies have increased outsourcing of benefits functions in the past two years.

The top two challenges facing benefits departments, by a wide margin are compliance with benefits laws and regulations (73%) and rising health care costs (52%). By outsourcing certain functions, more time can be spent on addressing these key challenges, which creates a positive balance for companies, the International Foundation of Employee Benefit Plans says.

The foundation’s 2015 survey on “Corporate Benefits Departments: Staffing and Operations” finds that more than one-third of companies have increased outsourcing of benefits functions in the past two years.

On average, companies report outsourcing 40% of their benefit functions, most commonly for:

  • Employee assistance programs (77%);
  • Flexible spending accounts (FSAs) (69%);
  • COBRA (64%);
  • Retirement benefit payments (56%); and
  • Pharmacy benefits administration (53%).

The No. 1 reason companies outsource is to tap into more specialized expertise (48%). Other companies cite technology (17%), costs (12%), and risk (11%) as their main reason for outsourcing.

“An outsourcing increase is a positive thing for benefits departments,” says Julie Stich, research director at the foundation. “Benefits staff are working smarter and more efficiently by choosing the mix of outsourcing, co-sourcing and in-sourcing that’s right for them.” More benefits departments are adding staff members, creating balance and strategic focus among departments, Stich says.

A majority of companies handle annual enrollment (62%), Family and Medical Leave Act (FMLA) administration (60%), and benefits communication/education (54%) fully in-house. Companies rarely completely outsource benefits strategy/design (7%) and benefits communication/education (1.5%).

Other challenges include employee engagement, communication of benefits/changes, strategic benefits planning and administration of benefits/changes.

Stich also notes that outsourcing functions means more time can be spent addressing key challenges, such as benefits communication and wellness. Almost 30% of companies dedicate staff primarily for benefits communication, and 34% dedicate staff primarily for wellness programs.

What does the staffing environment look like at most companies surveyed? The average benefits department has more than five staff members. About three staff members make up the department in companies with fewer than 1,000 employees, and up to 11 benefits staff members work in companies with more than 10,000 employees.

Benefits departments are growing, and the job outlook for employee benefits is strong. In the past two years, more companies have increased the size of their benefits staff than have decreased it. More than one-third of companies have created a new benefits staff position or title. The majority (73%) of respondents said they are optimistic about the future of benefits careers.

Members can access the full survey through the foundation’s website.