Is Your Company Group Benefits Plan Compliant?
By Dan Lawrie Insurance Brokers - a HR-Fusion strategic partner)
Group benefit plans are an integral, and expensive, component of most
employers’ compensation offering to employees. Improperly managed,
benefit programs can also send an employer to court.
To avoid potential liability, it is important that appropriate administrative processes and procedures are maintained to ensure your benefit plan is compliant with the in force insurance contract as well as current legislation. Following are three (3) of the many processes and procedures that need to be in place.
Life Insurance Conversion Privilege & Terminated Employees
Group Life insurance policies carry a provision that allows terminated employees access to an individual life insurance policy. This policy is offered as long as coverage is applied for within 31 days of termination of the group insurance benefit.
Employers must make employees aware of the conversion privilege on employment termination. Failure to do so could result in significant legal and financial liability.
Individual health, dental and disability plans are also available in the marketplace. Although not an insurance requirement, employers are encouraged to make terminated employees aware of this availability.
Continuation of Benefits within a Severance Agreement
On occasion, employers may offer a continuation of benefits as part of a severance agreement with a terminated employee. Typically, insurance contracts restrict benefits to active employees; however most insurers will extend some benefits on an extra contractual basis.
The extra contractual agreement must be pre approved by the insurer. The insurer will also stipulate what benefits can be offered and will restrict the length of time the benefits may remain in effect. Making an agreement not supported by the insurer could result in the employer facing significant legal and financial liability.
Life and disability benefit amounts are most commonly determined by an employee’s income. Employers must make every effort to promptly notify the insurer of income changes to avoid disputes about the amount of the benefit payment in the event of death or disability.
A clear definition of income must also be understood and defined in the insurance contract. This is particularly important for the treatment of bonus and commission as part of income. If not properly reported, the employer could be liable for some or all of the benefit payment in the event of death or disability.
As always, to avoid unpleasant surprises, it is important to work with a professional in this area. To learn more about Group Benefits Plan compliance, call Dan Lawrie Insurance Brokers at 905 525 7259.