The Outsourcing Decision
Cost Analysis of In-house vs. Outsourcing
The Costs analysis sounds fairly straight forward.  Compare the costs of doing it in-house vs. the outsourcing option.  However, if you do not get this one right, you are in deep trouble.  Unfortunately, if the numbers are wrong, it doesn't take a real long time to recognize you may have made a poor decision.  My goal is to help you think about the kinds of costs you incur in-house and the costs of an outside vendor.  If I miss anything, please let us know on the message board and I'll add it to the list.
Let's get started...
May seem straight forward, but don't get it wrong..
List of In-House Processes and Costs:
First Step - Identify all processes done in-house
I believe the first important thing to accomplish is to fully understand every process it takes to do your in-house benefits administration.  It's like moving from one house to another.  You first need to do an inventory of what you got before you can think about moving it.
This site is Under Construction:  More to come later
1.  Staffing - Salary, bonus, stock options, benefits burden, office space, computers, telephones, travel, entertainment, and other costs associated with each person who is working on your in-house administration.
2.  Staffing - Technical support.   You need to make sure you identify the costs of Legal, Tax, Financial Services, and other in-house staff that supports your benefits administration.
3.  Communications costs.  Cost of postage, envelopes, sorting, delivery services, filing of materials, returns, and other costs related to communicating your benefits programs.  You should also try to identify the costs of in-house distribution of materials (desk to desk, e-mail, etc.)  These are significant costs that need to be understood as you go forward.
4.  Systems costs.   Here's one of the big cost items that is sometimes hard to identify.   We need to identify hardware costs, development costs, upkeep costs, licenses for software, and related support for the systems,e.g., legal, tax, HR, computer systems people, etc.   This can be a major part of your costs.  What's condition are your systems?  Do they need to be upgraded?
5.  Incidental costs.  Include plan documents preparation, IRS filings, audits, trustee costs, processing of distribution checks, etc..

This is just a brief list of items to consider.  I'll try at a later date to even provide more details, but this should get you started
This page was last updated on: February 2, 2010
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