You made a mistake with your employees' benefits. Now what?

• Key Insight: Discover how benefits administration errors quietly erode employee trust and legal standing.  
• Expert Quote: Communication gaps cause most operational benefit errors, not complexity alone.  
• Supporting Data: 73% of companies report at least one major benefit compliance error annually.  
• Source: Bullets generated by AI with editorial review

Everyone is entitled to make a mistake, including HR and benefit leaders. But what happens after is the important part.  
HR and benefit teams spend around 40% of their time on benefits administration, according to research from employee benefits solutions platform Amplify. And yet, 73% of companies still have at least one major benefit compliance error annually — potentially costing organizations thousands of dollars and risking employees' trust and allegiance. Knowing how to successfully address those missteps and correct them is a critical skill for any and all leaders.    

"Operational errors can cover a significant number of different topics," says Charles Bruder, chair of the ERISA and Employee Benefits Group at commercial law firm Norris McLaughlin. "All of these types of errors or lack of oversight, however, typically occur because there's not sufficient communication." 

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One of the most common mistakes a benefit leader makes is not following a plan document, according to Bruder, overlooking critical directives for an employees' benefit plan. This includes failing to enroll an employee in the company's 401(k) retirement plan before their waiting period is over, denying a health insurance claim that was valid and misrepresenting life insurance coverage. Forty-four percent of employees also report discovering a payroll mistake at some point, according to a recent survey from HR company Hibob, 42% of which said these errors happened as frequently as every pay cycle.

Despite their severity, oftentimes these errors will go unnoticed for months, or sometimes even years, until the employee themselves notices that something went wrong. That doesn't change the fact that organizations will still be held liable and will likely have to incur any additional administrative expenses associated with the mistake, which could involve accountants, HR leaders, payroll folks and ERISA council members who have to come in and sort through what's going on. 

"If there really was a mistake and a deferral didn't go into the plan in a timely manner, both the IRS and the Department of Labor require that the affected employee be put back into the same financial circumstances that they would have been in if the mistake hadn't happened," Bruder explains. "That cost increases exponentially depending on how large the affected population is." 

How you make it right matters

Admitting to a mistake is never easy, but it can make a huge difference when it comes to getting employees on board with a solution. According to a survey conducted by online educational platform Dale Carnegie Training, 81% of employees said it was important for a leader to admit they were wrong, with only 41% believing that their own supervisor would actually own up to their mistakes. If possible, Bruder urges benefit leaders to flag a mistake as early as possible and to take the initiative and start a conversation with affected employees. If the matter is brought to their attention after the fact, they should act quickly and follow up with solutions immediately.      

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"You can tell the plan participants you're going to fix things over and over again but until you do, they will remain skeptical," Bruder says. "Communicating with the participants once an error is discovered is important, but explaining to them not only what happened, but how it happened and what the company is doing to correct the error and prevent it in the future is the most powerful message."

Taking the right preventative steps

A clear line of communication between every department is critically important in fending off avoidable mistakes, as is establishing a checks and balances process between departments so as to distribute the accountability equally. The most effective way to put a stop to slip-ups is to keep employees educated and engaged in their own benefit plans.  

"Lots of time plan participants themselves can be your best safeguard against operational failures," Bruder says. "Making sure that employees know how their plans operate and how they're administered can be the key to preventing these errors in the future."