Guide to benefits reconciliation

Written by: Elizabeth Walker
Published on March 23, 2022.

Recently, many employers have heavily invested resources into recruiting and retaining talent by providing benefits that make employees happy and healthy. According to a Glassdoor survey, 80% of employees would prefer additional benefits over a pay increase.

It can be challenging for HR leaders to control rising benefits costs while staying compliant with the latest Affordable Care Act regulations. Benefits reconciliation can help scan for errors, but the process can take longer and lead to costly mistakes if not done carefully.

In this article, we’ll 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.

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. The process is typically performed by a company’s benefits specialist or accounting specialist, and is best performed at regular intervals, such as monthly or quarterly.

The goal of benefit reconciliation is to confirm that all payments are accurate, meaning that no charges are above or under the intended amount. Employers also check if all employees are enrolled in the right insurance plans and that no terminated employee is still receiving a premium payment.

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

  • Employee's name
  • 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 need to be taken to correct any errors.

Not sure if you need to offer health insurance at all? Find out in our guide

Why is benefits reconciliation important?

Benefits reconciliation shouldn’t be a throwaway chore. It’s a critical activity for your business to ensure that enrollments, payroll, and benefits invoices are accurate and 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 say 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.

To mitigate these pitfalls, some businesses have turned to automated benefit reconciliation services or payroll software solutions. With these programs, reconciliation of carrier invoices, payroll data, and employee enrollments can be done quickly and easily and leave organizations more time to contribute elsewhere.

Automated 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 an essential part of confirming 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 is run below.

How to do payroll reconciliation for your business

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

A payroll reconciliation should be completed whether you’re using a payroll software or not. During reconciliation, you compare the current period's payroll amount with the numbers listed in your payroll ledger to ensure that both the 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 under payments, 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. If errors aren’t caught in time, an employer can face unexpected costs and potential legal action.

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 it’s crucial to conduct regular benefits reconciliation for your business 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.

Originally published on March 23, 2022. Last updated March 23, 2022.


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