Different Types of Benefits Outsourcing

There are three primary approaches to benefits outsourcing: 

1. Full benefits outsourcing 

In full outsourcing, the vendor takes over the management and administration of all or nearly all employee benefits processes and programs. This typically includes: 

• Benefits administration 
• HRIS and payroll integration 
• Open enrollment 
• COBRA administration 
• Billing and reconciliation 
• Vendor management 
• Compliance and reporting 
• Benefits communication 
• And more 

Full benefits outsourcing maximizes economies of scale and allows the company to entirely shift its focus from benefits administration. However, it also requires the highest level of vendor management. 

2. Partial benefits outsourcing 

With partial (or selective) outsourcing, companies outsource one or several discrete benefits functions while keeping others in-house. Typically, outsourced functions include: 

• COBRA administration – Managing notices, enrollment, premium collection, compliance reporting, and more related to COBRA benefits continuation. 
• Billing and reconciliation – Handling the preparation and payment of benefits invoices and reconciling bills across multiple carriers. 
• Retirement plans – Administration of 401(k), pension, and other retirement plans. 
• Benefits communication – Developing and executing communication campaigns and materials around benefits programs. 

Partial outsourcing provides flexibility to outsource benefits functions that are especially complex or expensive while retaining others internally. 

3. Administrative benefits outsourcing 

Administrative benefits outsourcing focuses strictly on administrative tasks like paperwork, data management and transactional duties. The vendor handles routine benefits administration based on parameters set by the employer. 

This approach minimizes disruption to existing benefits infrastructure while leveraging vendor capabilities around enrollment, eligibility management, billing and reconciliation and more. The employer retains control over strategic benefits decisions.