Selecting software to run a flex program - employee benefit delivery strategy

If you are thinking about administering your flexible benefits plan on an in-house computer, think service, not savings. This advice comes from software publishers and third-party administrators.

The cost of buying and using most software for flexible benefits plans ranges from about $2,500 to $5,500 in the first year. In comparison, third-party administrators typically charge $3 to $5 per employee per month. At that price, it may not pay you to administer a flex plan in-house unless you have at least 300 employees enrolled in your plan, says Richard Ong, president of Ong & Co., a plan administrator in Overland Park, Kan.

Saving money on software is not always the key issue with small companies that want to administer their flex programs, says Timothy Yeager, president of A.W. Rehn & Associates, a plan administrator in Spokane, Wash. "Most companies that administer their own flex programs are really looking for a little more control or a little more flexibility than they can get from a third-party administrator."

On the other hand, adds Yeager, hiring a third-party administrator eliminates confidentiality problems that might arise when a small company administers a flex plan in-house. For example, an employee submitting a reimbursement claim for psychiatric treatment might feel uncomfortable dealing with a company bookkeeper who also handles the flex plan.

There are about a dozen microcomputer-based packages on the market. They run on IBM personal computers or compatibles with either an 80286 or an 80386 Intel Corp. microprocessor and a hard disk drive.

It makes little difference if the monitor is monochrome or color, although color is visually more pleasing. The price of the flexible-benefits software is between $1,750 and $4,500. Many companies also charge $600 to $1,000 per year in maintenance fees, which cover, among other things, telephone hot-line help and program updates when benefits regulations change. Telephone support, if billed separately, typically runs about $60 an hour.

One exception to the minimum-employee rule is Benefit Innovations of Missoula, Mont. J.R. Chipman, company president, has developed a flex management handbook that comes with telephone technical support and software for a total of $985. Unlike the other companies selling software, Chipman has designed his flex package for companies with fewer than 50 workers.

What should you look for in a program for administering flexible benefits? "You're looking at ease of use, whether it is cost-effective, and whether the rules and regulations are in it," says Rick Bindler, marketing representative at Datair Employee Benefit Systems Inc., a software publisher in Westmont, Ill.

Most programs are based on a system of menus that guide users through the steps of setting up accounts, entering data, creating reports, and so on. They are easy to use, but you should figure on a day to a week for training. More-sophisticated packages will have help screens in pop-up windows so you won't have to dig through a manual.

All packages are capable of generating the wide variety of reports--from mailing labels to employee account summaries--that are needed to administer the plan. Some programs allow you to tailor standard reports to fit individual needs. "No one is ever happy with standard reports," according to Charles Kerr, president of Insurance Systems Group, Inc., a software publisher based in Raleigh, N.C.

Keep in mind that employee data are among the most sensitive a company can store in its computers. Look for packages that offer password security that both limits access to authorized users and maintains a record of who logs onto the system and how the system is used.

You should consider flex-plan programs that can adapt as your company grows or changes, Kerr says. Although it is not likely that you will outgrow the program (most can accommodate thousands of employees), you may decide to switch software or move your records to a different computer system. Look for a program that allows you to interact with payroll, pension, and other related programs. Many packages will run on personal-computer networks, although some software publishers charge more for the feature.

Most software vendors offer free demonstration programs designed to highlight key features, but the demos may not function like the real thing. Mayer Hoffman McCann, a software publisher and accounting firm based in Kansas City, Mo., charges $50 for a fully functional test package that self-destructs after a specified number of uses, says Scott Davidson, account representative at Mayer Hoffman McCann.

The quality of telephone technical support varies widely. Ask the vendor for customer references, and call them to find out how responsive the company has been in resolving problems.

Michael Alexander is a senior editor of ComputerWorld, an industry publication.

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