Employee benefits are one of the largest and most complex expenses many employers manage — and they also include strict fiduciary obligations.

Yet many organizations assume that once open enrollment ends and payroll deductions are set, everything will continue to run smoothly. In reality, enrollment changes, life events, terminations, plan switches and billing delays routinely create discrepancies that can quietly cost both employers and employees money.

That’s why it’s important for employers to conduct regular reconciliations of their benefits offerings to confirm that:

• Employees are enrolled in the plans they chose,
• Payroll deductions reflect the correct coverage tier and contribution amount, and
• Carrier billings are accurate.

Key areas of the benefits reconciliation process

Gather information — Reconciliation begins with assembling accurate, matching data for the same coverage period. Employers typically need carrier invoices, payroll deduction reports and enrollment records from their HR or benefits administration system.

Using data from different periods can create discrepancies, so timing matters.

Compare enrollment and invoices — Employers should compare the list of employees and dependents on carrier invoices with internal enrollment records. This step helps identify common issues such as terminated employees still being billed, active employees missing from invoices or dependents incorrectly listed. It also confirms that employees are enrolled in the correct plans.

Verify payroll deduction amounts — Next, payroll deductions should be reviewed in comparison against plan rates and contribution structures.

This includes checking employee-only versus family tiers, employer subsidies and any midyear changes triggered by qualifying life events. Even small per pay period errors can add up over time if left uncorrected.

Investigate issues — Discrepancies are common and do not necessarily indicate a system failure. New hires may not yet appear on invoices, plan changes may not have been processed in time or terminations may have missed the carrier cutoff date.

Each issue should be investigated, corrected and communicated to the appropriate party — whether that is payroll, HR or the carrier.

Document findings and resolutions — Finally, employers should document findings and resolutions. This may involve adjusting future payroll deductions, requesting invoice credits or corrections from carriers or updating enrollment records.

Clear documentation creates an audit trail and helps prevent recurring errors.

Reconciliation protects firms and staff

Regular reconciliation protects budgets by preventing “premium leakage” — paying for coverage that no longer applies or deducting insufficient amounts from employee paychecks.

For example, if an employee is terminated and not removed from enrollment in a timely manner, the company will be held financially responsible for paying 100% of benefit premiums. Reconciliation would catch this issue.

Reconciliations also help mitigate potential legal issues and reduce the risk of employee dissatisfaction when errors surface months later and large corrections are required. From a governance perspective, reconciliation supports data integrity and financial accuracy across HR, payroll and finance functions.

Best practices for employers

Conduct regular audits — Monthly reconciliation is widely considered a best practice, especially for medical, dental and vision plans.

Use automation wisely — Many employers now use payroll or benefits administration tools that automate comparisons between enrollment, deductions and invoices, reducing manual work and improving accuracy.

Consider third-party support — There are vendors that specialize in benefits reconciliation and invoice auditing. These services can be valuable for organizations with multiple carriers, frequent employee changes or limited internal resources.

Include COBRA and other benefits — Reconciliation should extend beyond active employee plans. Employers should also confirm that COBRA participants are billed correctly and that voluntary and ancillary benefits are handled with the same discipline.