Talking About Financial Matters That Affect You and Your Organization
3 Benefits Landmines
Aug 21st, 2016
As with all administrative duties, the devil is in the detail. Over the last few months there has been a disturbing trend among clients around missing some of the day-to-day obligations of administering the benefits program. Here are three common landmines,
- Failure to enroll an eligible plan member within 31 days of eligibility. Since benefits can form part of the employment agreement (written or implied), failing to enroll an eligible plan member could create a significant liability should that employee be declined coverage due to a pre-existing condition which was only discovered through the late-applicant restrictions of the benefits provider. Financial and reputation risks are significant should this occur.
- Failure to complete the Life Waiver for plan members who are off work due to illness or injury. Embedded in most group insurance contracts is an obligation for the insurer to waive the premiums but keep coverage in-force for eligible plan members who have not returned from an approved disability leave. While the failure to complete the waiver will result in unnecessarily paying premiums, the bigger risk is at termination. Upon termination the employee loses all coverage except for those that had been approved by the insurer in advance of the termination (like the life waiver, AD&D waiver, Long Term Disability benefits etc). The risk to the employer is a lawsuit by the beneficiaries at time of death, and the limitation of changing providers whereby the new provider will not accept the risk. Both of these are easily avoided by ensuring the paperwork is done.
- Continuation of Benefits for employees not actively at work. While the employment agreement (written or implied) may require the employer provide benefits until termination or retirement, is that the risk you want to carry? Employers can stipulate the duration of coverage should an employee be absent from work, which will limit risk. Failure to have this policy could result in a requirement to terminate an employee to remove benefits coverage. Since termination can be tricky in the case of a disability, this benefits risk is problematic.