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‘Death audits’ and 6 other ways to avoid benefit errors

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in Employee Benefits Program,HR Management,Human Resources

Whether you work with a comp and benefits team of one or 100, chances are you don’t have time to check every calculation you make. Yet mistakes that slip through can cost an organization millions of dollars in benefits overpayments.

Take the case of the company that invited its first 100-year-old retiree and his family to a birthday bash only to discover the man had died 20 years earlier and his son had been cashing his retirement checks ever since.

Richard DeFrehn, head of the administration consulting practice at Sibson Consulting, says an every-other-year “death audit” would have caught the fraud years earlier. He recommends that organizations search for death records for every retiree during the audit.

Here are six other ways to head off benefits administration mistakes before they wind up costing your organization big bucks:

1. Cross-train administrators who do similar jobs so each knows what the other does. DeFrehn tells of an organization with two administrators responsible for terminating benefits when employees left the company. They had no contact with each other, so one might process an employee before the other one did, holding up the termination of benefits. The result: The firm paid about $1 million worth of premiums they did not owe for former employees. The solution: Once the two trained together, they synchronized their schedules so each completed the required paperwork at the same time.

2. Update your technology. Some programs automatically update spreadsheets with preprogrammed error messages, so the administrator checks the computer’s work rather than his or her own work.

3. Set up a system for triple-checking. DeFrehn recommends that three people check every number: the administrator who did the calculation; a colleague who is involved with the work but did not do the calculation; and a third who was not involved with the work. Involve an actuary in the most difficult calculations.

4. Take your time with work that involves numbers. DeFrehn worked with an organization that cranked out benefit statements for employees within 10 days of the end of each quarter, and they were full of mistakes. When they eased their deadline to 20 days, the mistakes all but disappeared.

5. Keep up-to-date on changes to laws covering pensions and benefits. Many firms outsource compliance work because it’s not possible for a small HR staff to be out of the office for regular compliance-related training.

6. Perform an ABC (administration of benefits and compliance) audit every three years. ABC reviews can unearth everything from overpayments to compliance breaches. Most organizations use outside consultants to conduct the audits.

“Any time someone does something, someone else should review it—on every transaction,” advises DeFrehn. “People make mistakes, and they can cause issues.”

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