Administrative Services Only (ASO) | Meaning and Definition

What is Administrative Services Only (ASO)?

Administrative Services Only (or ASO) is when companies hire a third-party vendor to administer the agreement they create while funding the employee benefit plan (also known as 401k or HSA). The work of these hired firms is simply the administration of the agreements. The original companies are the ones who fund the agreements and abide by its terms.

Insurance companies, for example, provide administrative services only. When an employer hires an insurance company, this company is responsible for processing the claims and evaluating them under the existing health plans. The employer, however, retains the task of paying for the claims.

What is covered by Administrative Services Only? 

Administrative Services Only (ASO) caters only to certain kinds of health benefits, so it is not suitable for any company to cover all kinds of health benefits. The areas usually covered by an Administrative Services Only company include Dental benefits, Short-term Disabilities, and Long-term disabilities. A firm providing Administrative Services Only does not ordinarily provide other health benefits. Those are covered by external service providers who cover the entire process and not just the ASO.

Why Choose Administrative Services Only?

There can be some serious advantages to hiring an Administrative Services Only firm, making it a more suitable choice than a full-service external provider. Some of the reasons why an ASO is beneficial to include: –

–  Significant Savings: Administrative Services Only providers are often extremely low costing resulting in significant savings for the firm that hires them. This is especially beneficial for larger firms that have many employees who all have different needs.

–  Flexibility: Administrative Only Services are much more flexible in their processes and operations than other service providers. This comes in handy when firms are designing the benefits to ensure maximum security of interests of the employers as well as employees.