Enterprise HR suites are built for companies with HR departments. Many employers with 25 to 150 employees pay for modules they do not use, or for a PEO bundle priced as a percentage of payroll. This guide sets out the main alternatives, what each one covers, and which compliance tasks stay with you whichever you choose.
Five ways to run benefits administration
1. Benefits administration bundled with payroll
Many payroll providers include online enrollment, deductions and basic ACA reporting. This suits fully-insured plans with simple eligibility rules. Check whether the provider files Forms 1094-C and 1095-C for you or only produces the data, and whether it sends enrollment changes to carriers automatically or you must do it by hand.
2. Carrier enrollment tools
Insurance carriers usually provide online enrollment and billing for their own products. They cost nothing extra, but each carrier's tool covers only its own lines, so a company with separate medical, dental and life carriers ends up with several portals and no single record.
3. A professional employer organization (PEO)
A PEO takes on payroll, payroll tax filing and benefits under a co-employment agreement, and your employees join the PEO's plans. It removes the most administration, but you give up control of plan choice and pay the PEO's fee on top of premiums. Ask whether the PEO is IRS-certified under Internal Revenue Code section 3511, what the fee covers, and what it costs to leave. Our guide to PEO carve-outs covers keeping your own health plan inside a PEO.
4. A third-party administrator (TPA)
If your plan is level-funded or self-funded, a TPA processes claims, maintains eligibility and produces claims reports, and often handles COBRA and plan documents as add-on services. Here the funding decision drives the administration decision. See how the funding arrangements compare.
5. Broker-provided administration services
Some benefits brokers include an enrollment platform, employee support or compliance help in their service. Ask for the list in writing and ask how the broker is paid: under ERISA section 408(b)(2)(B), added by the Consolidated Appropriations Act, 2021, brokers and consultants to group health plans must disclose in advance the direct and indirect compensation they expect to receive of $1,000 or more.
Compliance tasks that stay with the employer
- ACA reporting. An applicable large employer, 50 or more full-time employees including equivalents, files Forms 1094-C and 1095-C each year (Internal Revenue Code sections 4980H and 6056).
- COBRA. Employers with 20 or more employees must offer continuation coverage (Internal Revenue Code section 4980B). Failures can trigger an excise tax of $100 a day per qualified beneficiary, capped at $200 a day per family (section 4980B(b) and (c)), and a plan administrator who fails to provide required information on request can be liable for up to $110 a day under ERISA section 502(c)(1) (29 CFR 2575.502c-1).
- Form 5500. A welfare plan with 100 or more participants at the start of the plan year files Form 5500; smaller unfunded or insured plans are exempt (29 CFR 2520.104-20).
- Plan documents. Every ERISA plan needs a written plan document and a Summary Plan Description for participants, whatever tool runs enrollment.
- Section 125. Pre-tax premium deductions need a written cafeteria plan document. Premiums paid pre-tax under the plan are excluded from FICA wages (Internal Revenue Code section 3121(a)(5)(G)), which saves the employer its 7.65% share (6.2% Social Security up to the annual wage base, plus 1.45% Medicare; section 3111) on those dollars. Our Section 125 guide works through the arithmetic.
How to choose
- Start from your funding arrangement. Self-funded and level-funded plans need a TPA; fully-insured plans can run on payroll or carrier tools.
- List the tasks above and write down who does each one today: you, payroll, the carrier, a broker or nobody.
- Get proposals that price every task, not just the software, and include any per-employee fees and implementation charges.
- Time any change to your plan renewal so enrollment, deductions and carrier feeds switch on the same date.
The Premium Renewal Stress Test is a useful first step if the real question is whether your plan's cost, rather than its administration, needs to change.
Frequently Asked Questions
Do we need an enterprise HR platform to stay compliant?
No. Compliance depends on doing specific tasks on time, not on the size of the software. An employer with 50 or more full-time employees, including equivalents, files Forms 1094-C and 1095-C (Internal Revenue Code section 6056). An employer with 20 or more employees offers COBRA (section 4980B). A benefit plan with 100 or more participants at the start of the plan year files Form 5500 (29 CFR 2520.104-20). Payroll software, a carrier portal, a PEO or a TPA can each handle these tasks if the responsibilities are written down.
Will employees lose coverage if we change administrators?
Changing the software or administrator does not by itself change anyone's coverage. Coverage gaps come from mismatched dates, so line up the end of the old arrangement with the start of the new one, usually at your plan renewal, and transfer enrollment data, COBRA participants and any pending claims before the switch.
Is a PEO the same as a benefits administration platform?
No. A platform is software you run. A PEO is a co-employment arrangement: it runs payroll, files payroll taxes and sponsors the benefit plans your employees join. With an IRS-certified PEO (CPEO), the PEO is treated as the employer for federal employment taxes on the wages it pays (Internal Revenue Code section 3511); with a PEO that is not certified, your business generally stays liable if the PEO does not pay.
