September 1, 2015
Benefits Administration 101
With going back to school at the top of mind, we thought it an appropriate time for a benefit administration refresher course.
When drafting an offer letter, consider including your corporate policy as to what benefits will be continued and for how long in the event of termination or an absence due to disability. Wording that the extension is subject to approval from the insurance company can serve to protect you from covering the costs of the promised benefits that the insurance company will not continue. Always get such documents approved by an employment lawyer.
Employees must be enrolled within 30 days of their effective date. Failure to enroll by then will result in the employee and their dependents being considered a late applicant. Late applicants must complete a medical questionnaire and be approved for coverage by the insurance company. Any medical issues noted may lead to coverage being limited or declined.
Employees can designate a beneficiary of their choosing. Any changes on the designation must be initialled. Corrective fluid or tape may invalidate the designation. The original document must be kept on file. Often, when there is a claim for the life insurance, the original form is required.
When an employee’s life circumstances change (ex. marriage, divorce, etc.) the plan information must be updated within 30 days of the change otherwise the dependent could be considered a late applicant.
Submitting a change in a timely manner also ensures that you are being billed the proper amount. Single parents, whose children no longer qualify as a dependent due to age, will want to have their coverage changed from family to single to save on premium.
Children are covered up to a certain age – usually 21 or 22. However, if they are in school full-time, that coverage can be extended to 25 or 26 depending on the contract. For these overage dependents, the insurance company must have a record of the school information in order to pay claims. This information must be updated each school year.
Many plans include benefits that are a percentage of earnings. Plan administrators should work with payroll to ensure all records are up to date and reported to all insurance carriers. If you submit a bulk
change, be sure to include the effective date of the change for all employees.
Some plans have multiple insurance providers, be sure to provide updates to all providers including new hires, terminations, salary changes, etc.
Waiver of Premium
Waiver of Premium (WOP) is a feature typically included on life and disability plans. It may also be on AD&D and critical illness insurance plans but is not available for health and dental plans. It means that the premium for those benefits is waived if the employee is absent due to illness or injury. If your plan includes LTD, the WOP is automatically processed when the LTD claim is approved. However, if your life and LTD plans are with different insurance companies or your plan does not include LTD, you must apply for the life WOP separately.
Workers’ Compensation Claims
If your plan includes LTD, an application for LTD should be made even if the case is a Workers’ Compensation (WC)claim. The LTD payment may be fully offset by the WC payments but if the WC ends, and the employee still meets the definition of disability under your policy, the LTD can start paying. If WC ends and there was no LTD claim on file, it could be declined because the claim was not submitted within the allowable timeframe.
Employees always have the option to convert their basic life insurance to a personal policy upon termination of the coverage. The terminated employee must be under age 65 and must apply to the insurance company within 30 days of their date of termination. Medical information is not required for converted policies. Depending on your contract, other benefits may also include a conversion option. It is good business practice to remind employees of this feature when providing their termination notice and the insurance company contact information to start the process.
Insurance companies may continue some but not necessarily all benefits during a severance period. Disability coverage is never continued. Therefore, always get approval to extend coverage prior to making a severance offer. Otherwise, your company may be responsible for the costs of those claims.
When in doubt, contact your GMS associate for advice before making changes or promises.
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