Employee Benefit Agreements are becoming increasingly popular as companies seek ways to lower costs. Soaring costs of health care coverage and administration of retirement, pension, and disability plans can dramatically lower a company’s profit margin. Therefore, more and more companies are turning to outside firms that specialize in administration of Employee Benefit Plans.

It is easy to see how the principle of economies of scale is applicable to this situation. An outside company specializing in benefits administration can pool together the benefit plans of tens or hundreds of companies in order to find the lowest possible rate for health care, as well as lower the administration fees for pension and retirement plans. In order to put these relationships into effect, employers and these outside benefit plan administrators must sign employee benefit agreements, formally effectuating the transfer of duties and liabilities for administrating the benefit plans to the third party firm. Without these agreements, employees would be without legal recourse if something were to go wrong, and employers would be primarily liable.

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