Tuesday, April 10, 2018

How to Reconcile an Employee Benefits List Bill

If you are new to doing payroll for an employer group that offers any voluntary benefits, you'll soon discover that you'll need to send in the premiums you've been collecting from the employee's paychecks for those benefits.

It's a common practice for the insurance companies that offer these voluntary benefits to send a list bill to your company. You'll get this bill either in the mail or online. In this article, I'll walk you through what to do with this bill including how to reconcile it.

Why you should you reconcile the list bills you receive

Before I talk about how to reconcile your bill, you might wonder why you should reconcile the bills you receive in the first place. I have worked with employer groups who never reconcile their bills either because they didn't know that they should or a variety of other reasons.

Surprisingly, some employer groups just pay the amount listed on the list bill whether they collected that amount or not. One employer group told me they sent in thousands of dollars in premiums for health insurance that they didn't collect from employees. This meant they were either out of that money or had to collect it retroactively from employees who were still there.

It's a good practice to reconcile the list bills you receive from the insurance companies with the payroll registers. That's because it's a lot easier to correct a problem when it occurs than five years after the fact. Problems discovered that far down the road can't easily be corrected - if at all.

Obviously, reconciling takes time to do. This can be a problem if you are working with thousands of employees. In many cases, large employers just send in their payroll registers and let the insurance company reconcile it.

Work with your agent to figure out a plan that works best. Over the years, I've reconciled bills for my employer groups whenever I've made changes, they've made a change in the person who handles the payroll or for a variety of other reasons. Some employers have even paid us to have their bills reconciled because it was cheaper and more effective to do it that way.

OK. Let's move on to how to reconcile your bill.

Identify all payroll deductions

It's a good idea to be proactive and make a list of all the payroll deductions that are setup in your payroll system. This will give you a clearer picture of what kind of accounting you'll need to do. It will also help you know what list bills to watch out for.

Find the voluntary benefits list bill

If you are on paper billing, one day your bill will arrive in the mail (or sometimes fax).

However, a lot of bills these days are delivered online. You might just get an email from the insurance company letting you know that a new list bill is available. You'll just need to login to see it.

You might have to ask the previous payroll person what the login information is or you might have to dig through their old files to find it. Call the insurance company or agent that services the account if you can't find it.

It's probably a good idea to change the password when a new person starts taking care of the bills so the previous person won't have access anymore. Sometimes you might also need to change the email address associated with the account as well.

Assuming you've gotten logged in, you'll either be able to print a bill out or view it some sort of billing interface.

Personally, I like to print the list bill out if I can so I can make notes on it.

In either case, look at the bill carefully for the billing frequency. In most cases, it will say monthly. But you'll find there are insurance companies that send a bill out for each payroll when a deduction comes out. This means it might say weekly, bi-weekly, semi-monthly or some other frequency.

Depending on your payroll setup, it's also possible you might receive more than one bill for the same insurance company. This could happen if you have some employees who get paid every week, others who get paid every two weeks and so on. From an administrative standpoint, it's easier to set up a separate bill for employees paid one way versus employees paid another.

Whether the bills are separated out like that will depend on who set up your employer group's account with the insurance company.

You may also have a file that contains copies of previous bills paid. This will be helpful to see how the previous person reconciled the bills.

Once you identified the bills you receive and the frequency, move onto the next step.

Print out a payroll register

The next step is to print out a payroll register that lists the deductions collected for the insurance company who sent you the bill. You want this payroll register to match the frequency the list bill covers.

For example, if the list bill is a monthly bill, print out a payroll register for the month. If your list bill matches your payroll frequency, then print a payroll register out for each pay period.

If you receive a different bill for employees paid on a different payroll frequencies, you'll want to print out separate payroll registers for those groups of employees.

Following these steps will make it easier to reconcile the bills.

Just like the list bill, I like to print the payroll register out so I can set them side by side for the next step.

Make a copy of the list bill

If I only have one copy of the list bill, I make a copy of it before I begin. That way, if I make a mistake, I have a clean copy I can work with as a back up.

Read the instructions on the list bill

The list bill will usually provide some instructions that will give you additional information about how to reconcile the bill. You'll also find out ow to let the insurance company know what your adjustments to the bill mean.

This will include things like how to note terminated employees and a place to write in how much you are including with the bill.

In any case, take a good look at the instructions. This will help you better administer that deduction with the insurance company.

Compare the payroll register to the bill

Next, you'll want to compare the payroll register to your list bill. I like to look at the first name on the payroll register and the amount deducted. Then I look at the list bill to make sure it matches.

As you do this, one of four things will happen.

  1. The deduction on the payroll register and the list bill match exactly If this happens, I put a check mark next to the deduction on both the payroll register and the list bill. Then I move on to the next name.
  2. The deduction on the payroll register does not match the amount shown on the list bill If this happens, I cross out the amount on the list bill and write in the amount that was deducted. I then circle the amount on the payroll register to remind me it was different. Next, I figure out the difference between the amounts and write the difference collected. If I collected more than what was on the bill, I put "+" next to the difference. If I deducted less than the bill shows, I put a "-" next to the difference.
  3. You have a deduction on the payroll register but that employee is not listed on the bill If this happens, I circle the amount on the list bill and write in the employee's name and deduction amount at the bottom of the bill.
  4. You notice an employee on the list bill but not on your payroll register If this happens, first circle the name on the list bill to remind you that this is an item you need to research. Most of the time, this is a terminated employee. But not always. It could be the employee cancelled the deduction with you and the insurance company doesn't know yet. It might also be that the employee didn't get paid and had no deductions. You'll want to subtract these amounts from the total the insurance company says is due.
You'll do this for each deduction on the payroll register until you've reviewed the entire bill. If you had to make adjustments, then you'll need to review those adjustments more carefully to find out what the reason is behind that difference.

Identify the adjustment amounts and balance your payroll register to the bill

Once you've gone through your entire payroll register, you want to add and subtract all the adjustments you noted from the amount the list bill says you should have collected as follows:

  • Add and subtract all the differences you noted on your payroll register
  • Subtract all the amounts for employees listed on the bill but didn't have deductions for
This gives you a total adjustment.

Add or subtract this adjustment to the amount the list bill says is due.

It should match your check. If it doesn't you'll need to recheck your math.

Once you've balanced, double check to make sure you followed the insurance company's instructions on how to note adjustments to the bill both in the amount you are sending as well as any information specific to each employee with a difference.

Contact your agent about any discrepancies you don't understand

Always reach out to your agent if something doesn't make sense. For example, if you have deductions for an employee but they don't show on your list bill some reason, that's something you'll want to figure out.

Other list bill reconciliation tips

Here are some additional tips that will help you reconcile your bills better:
  • As a general rule, always send in what you collect If the insurance company has been receiving the premium for an employee, it's always easier to correct any billing issue if premiums have been paid than if no money was sent in. If an employee cancelled coverage, the insurance company will usually refund that money to the policyholder.
  • Always keep a paper trail for deduction changes For my policyholders, I always ask the employer groups to have the employees contact me for any changes. Once I've worked with the employee and we've sorted out what they want to do, I send a payroll adjustment to the group. While you can certainly just have the employee notify you in writing what they want to do, it's much cleaner when the insurance company is involved to do their paperwork to.
  • Have procedures in place for missed deductions If an employee is off work due to a short leave or didn't have deductions taken for some other reason, decide how you want to handle those deductions. Sometimes employers collect a check from the employee to submit with the bill and other times, the employer will pay the bill and work with the employee to double up on deductions to get employees caught up once they get back. 
  • Remember every employee benefit is different You might handle your health insurance bill different than other supplemental benefits. Some bills premiums are collected in advance. Others, you just forward what you collect. Still others are pre-tax benefits that can't be changed during the year absent a status change. Work with your agents on each benefit and handle them in a way that both of you agree on.
Alright, those are some additional tips that usually help keep things cleaner. Now that aware of those and you've balanced your bill, it's time for the final step.

Make copies of your final reconciliation and send in your payment

Once you've reconciled the bill, make a copy of the reconciled bill and the payroll register that you reconciled it to. Keep a copy for your file.

Send your payment along with the reconciled list bill and the payroll register you used to balance the bill to the insurance company so they can make sense of what they have received from you.


Congratulations on reconciling your bill. Reconciling the list bills you receive is important. Work with your agent to develop the right way to reconcile each bill you receive.

Once you get the hang of the steps, and become more familiar with the employees on that particular list bill, the easier it becomes.

Let me know if you have any additional tips in the comments.

As always, if I can help you in any way, don't hesitate to reach out to me. I'm happy to help.

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Michael is a champion of guaranteed issue for employees in the workplace. He's been an insurance agent since 1992 and has worked with thousands of employees.