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Guide to benefits reconciliation

Health Benefits • January 30, 2023 at 8:41 AM • Written by: Elizabeth Walker

Many employers heavily invest their resources into building robust benefits to recruit and retain talent. According to a Glassdoor survey1, those resources are well spent—80% of employees would prefer additional benefits over a pay increase.

However, it can be challenging to control rising benefits costs while staying compliant with the latest Affordable Care Act (ACA) regulations. Benefits reconciliation can help scan for errors, but the process can take long and lead to costly mistakes if not done carefully.

This article will guide you through benefits reconciliation and why it’s important. We’ll also go over the different types of reconciliation and how to reconcile payroll for your business.

Looking to boost your benefits package? Check out our guide to fringe benefits

What is benefit reconciliation?

Benefit reconciliation, also known as health insurance reconciliation or premium reconciliation, is when premium bills are reviewed against a company’s payroll deductions to check for potential discrepancies. A company’s benefits specialist or accounting specialist typically performs the reconciliation at regular intervals, such as monthly or quarterly.

Benefits reconciliation aims to confirm that all payments are accurate, meaning that no charges are above or below the intended amount. Employers also check their employees’ enrollment status in their company’s health insurance plans and ensure that no terminated employee is still receiving a premium payment.

A company's health benefits information and payroll deductions spreadsheet for reconciliation may contain:

  • The employee's name
  • Benefit effective date
  • Coverage
  • Premium cost

Many employers waste time and risk making mistakes using manual reconciliation. While you have the option of manual benefits reconciliation, businesses can save time and headaches by hiring a payroll partner to automate your benefits reconciliation process and determine what actions to take to correct any errors.

Why is benefits reconciliation important?

Benefits reconciliation shouldn’t be a throwaway chore. It’s critical for your business to ensure that enrollments, payroll, and benefits invoices are accurate. It also allows you to scan for fraudulent activity to avoid financial inaccuracies. By reconciling, you can catch errors in your business’s general ledger and fix them before they become more problematic.

Ensuring reconciliation accuracy is also just as important. For example, some experts say2 that as many as 80% of medical bills in the U.S. contain errors. And, for 25%-30% of those bills, the errors are significant. The impact of this can include overpayments for billing errors, duplicate payments, and tax penalties.

Some businesses have turned to automated benefit reconciliation services or payroll software solutions to mitigate these pitfalls. With these programs, you can complete reconciliation of carrier invoices, payroll data, and employee enrollments quickly and easily, leaving you more time to contribute elsewhere.

Automated monthly reconciliation streamlines the process by scanning a carrier invoice, calculating results quickly, and recognizing mistakes. This is especially important for large companies with many employees.

These software solutions help eliminate costly benefit contribution errors, ensure compliance is followed, and provide an overall better benefits experience.

What are the different types of reconciliation?

When you run a business, one error in your accounting books can result in incorrect bank statements and potential IRS audits. Comparing a reconciliation bill against another may not be your most exciting business responsibility. However, it’s essential to confirm the accuracy of your company’s accounts.

There are five main types of general reconciliation, including:

  • Payroll and bank reconciliation
  • Customer reconciliation
  • Vendor reconciliation
  • Inter-company reconciliation
  • Business-specific reconciliation

For health plan benefits, you’ll mainly be doing payroll reconciliation. Let’s take a look at how that reconciliation process works below.

How to do payroll reconciliation for your business

Payroll is likely the most significant expense of your business, so it’s vital to get it right. The easiest way to check its accuracy is by regular payroll deduction reconciliations.

You can complete the payroll reconciliation process with or without payroll software. During reconciliation, you compare the current period's payroll amount with the numbers listed in your payroll ledger to ensure that both records match. This is a final check to make sure your processed amounts are accurate.

Use the following steps to reconcile payroll:

  1. Print out your payroll register
  2. Match each hourly employee’s time card to the pay register
  3. Make sure the pay rates and salaries for each employee are correct
  4. Check that you took all deductions out of employee paychecks
  5. Make entries in the general ledger according to your payroll register

It’s easy to miss over or underpayments, whether an employee is in the wrong plan, or if an employee isn’t enrolled in a plan at all, so be sure to check your transactions carefully. An employer can face unexpected costs and potential legal action if errors aren't caught in time.

Finally, keep all supporting documents in your records in case of an audit. By storing your documents safely, you’ll be able to back up why you made changes to your account balances.


Administering an employee benefit can be challenging for many organizations. With compliance regulations and deadlines to manage, mistakes can quickly occur. That’s why conducting regular benefits reconciliation for your business is crucial to catch any potential oversights.

Reconciliation can take some time, depending on the size of your organization. But the more consistent you are with the process, the fewer errors you’ll have that need correcting to stay in compliance.

This article was originally published on March 23, 2022. It was last updated on January 30, 2023.

1. https://www.glassdoor.com/employers/blog/5-job-benefits-attract-quality-candidates/

2. https://www.benefitnews.com/advisers/opinion/why-clients-should-care-about-medical-billing-errors-and-what-they-should-do-about-it

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Elizabeth Walker

Elizabeth Walker is a content marketing specialist at PeopleKeep. She has worked for the company since April 2021. Elizabeth has been a writer for more than 20 years and has written several poems and short stories, in addition to publishing two children’s books in 2019 and 2021. Her background as a musician and love of the arts continues to inspire her writing and strengthens her ability to be creative.