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Insurance Distribution and Enrollment Article, History of MagnaHR ? September 2001

By Richard J. Hughes, CEBS Insurance Distribution and Enrollment Magazine-Sept. 2001

Administrative Services Outsourcing?Human Resources, Employee Benefits and Payroll

HISTORY. Back in the early 1990?s, I had the privilege of working for Fidelity Investments at a time when Fidelity was just starting to think about additional services that they could offer to their business clients that were outside of their traditional defined contribution roots. At that time, they began to build the conceptual design for human resources, employee benefits and payroll outsourcing and administration. Today, Fidelity offers a variety of outsourcing capabilities to large employers?focusing on companies with 5,000 or more employees. Looking back, I was fortunate to be involved with this concept in its early stages of development.

In the late 1990?s, I began to realize that the concept that Fidelity Investments, Hewitt & Associates and several other large consulting and financial services institutions had pioneered before the Internet was a household word, could now be delivered to the small to medium-sized employer market through a 100% web-based Human Resource Information System (HRIS). Hence, MagnaHR was born.

THE LOWEST COMMON DENOMINATOR. Having worked in human resources and employee benefits for several Fortune 1000 employers, I knew that the most important component to effectively managing human resources administration was managing data. And the best way to manage data is to manage the system that controls virtually every interaction with each and every employee?payroll. While a high-end HRIS such as PeopleSoft, SAP, Oracle, etc. is a critical component for large companies, these systems are both too expensive and too complex for the small- to medium-sized employer market. With this in mind, we didn?t just set out to build a web-based HRIS, we knew from the very beginning of the development process that the entire system was going to be integrated with payroll. By having a robust HRIS with an integrated payroll, we can manage both the front-end interaction with the client and the back-end integration and administration with the various employee benefit providers. In other words, we can become the ?virtual? human resources department for our clients.

THE BUSINESS MODEL?PEO VS. ASO. Human resources outsourcing and administration is not a new concept in the small- to medium-sized market. The Professional Employer Organization (PEO) concept was started back in the early 1980?s. Under a PEO, the employees of the client company become employees of the PEO?this concept is also known as ?co-employment? or ?employee leasing??and allows the PEO to treat the worksite employees as their own and to approach the market as a single employer for employee benefits and workers? compensation purposes.

Due to the technological advances brought about by the Internet, a similar concept that doesn?t require the ?co-employment? relationship was created?this concept is called Administrative Services Outsourcing (ASO). ASO?s are beginning to develop due to the Internet and offer many advantages to the traditional PEO. First and foremost, the ?co-employment? relationship is not necessary, meaning that the client retains the employment relationship with their employees. Second, an ASO can offer either a ?bundled? or ?unbundled? list of products and services; a PEO cannot since they are the ?employer of record? and must fulfill the duties and fiduciary responsibilities as an employer. Third, PEO?s have always existed in a legislative ?gray area? since the concept has never been fully recognized by Congress or the Internal Revenue Service. In other words, a simple law change that made the ?co-employment? relationship illegal would completely eliminate the PEO industry. Fourth, obtaining health care and workers? compensation coverage as a PEO has become increasingly difficult since the carriers have a hard time underwriting the entire book of business of a PEO on a group basis. After all, since PEO clients can range from an accounting firm to a construction firm, developing a single group rating is nearly impossible?and many PEO?s have been forced to self-insure their book of business. Based on this, MagnaHR is primarily operating under the ASO model, while reserving the right to change to the PEO model under the right circumstances and for the right clients.

MAGNA HR. MagnaHR has eight (8) different products and/or services that can be delivered to clients directly through our own sales and marketing channels or through one of our joint marketing and/or strategic affiliates:

  • Magna HRIS?Our 100% web-based Human Resource Information System (HRIS) will provide our clients with access to a wealth of human resource data and company-specific information.
  • Magna ESS?For companies that want to provide employee-level access, the Employee Self-Service (ESS) product is the next level of the Magna HRIS application.
  • Magna E-Source?Through our affiliation with CCH, Inc., MagnaHR offers a web-based version of three of the most popular guides published by CCH?the U.S. Master Human Resources Guide, the U.S. Master Employee Benefits Guide and the U.S. Master Payroll Guide. These guides are also available in hard copy form at a discounted price. Additionally, we offer numerous web-based human resources training and development courses in order to help companies meet two primary human resources objectives: (1) to attract and retain qualified employees, and (2) to protect the assets of the corporation.
  • Magna Payroll?From electronic time entry and direct deposit to year-end W-2s and tax filing, Magna Payroll is a comprehensive service that helps our clients complete these essential tasks quickly and efficiently.
  • Magna ASO?Magna ASO will identify key integration points and opportunities to streamline your human resource, payroll and benefits administration services. By aligning our client?s human resource functions with their business strategies, we can ensure that the processes, practices, technology and staff are all working toward a common goal: a better built business. Under Magna ASO, we offer three package products, (1) Legal and Regulatory Compliance, (2) Employee Benefits Administration, and (3) Section 125 and Flexible Spending Account Administration.
  • Magna HR Consulting?Although primarily a function of Magna ASO, our consulting services are offered on a stand-alone basis. Combining high-powered talent with years of real-world corporate experience, MagnaHR consultants, along with our strategic affiliates, can provide one-time solutions and implementation strategies for all our client?s human resources, employee benefits and risk management issues.
  • Magna Voluntary Benefits?Now, more than ever, employees expect more from their employers. Enhanced benefit packages are becoming a high-cost reality in today?s competitive marketplace. With dramatic increases in employer-paid benefits, it can be quite challenging to find an affordable way to meet employee demands while still remaining profitable. Voluntary benefits are the answer. Voluntary benefits provide our client?s with additional benefits to offer employees without adding significant costs to the bottom line. Magna HR and our strategic affiliates have the resources to deliver Voluntary Benefits to the individual employees. Then, we handle all the administrative procedures, including payroll deductions. Throughout this streamlined process, we deal with the insurance companies directly and we eliminate the hassle of time-consuming research and extensive paperwork.
  • Magna Investments?Through our strategic affiliates, Magna HR can extend it reach to provide investment advisory services and financial education on an individual, group and corporate basis.

As I mentioned earlier, the most important component to effectively managing human resources administration is managing data. And the best way to manage data is to manage the system that cont

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