• What key areas can create big problems?
• How can you shield your business from hidden risks?
• Is your plan administrator part of the problem?

Late Enrolment

Most employee benefit plans require all new, full-time staff to serve a waiting period before they are eligible for their employee benefits. The waiting period is commonly three months but can longer or in some cases waived by the employer. An employee is eligible for coverage on the first day or first of the month following their waiting period. The insurer must receive a completed employee application within thirty-one days of the eligibility date or the employee will be considered a late applicant.

Late applicants are required to complete a medical questionnaire for themselves and their dependents that require coverage. Their coverage is subject to approval by the insurance company before coverage can be granted.

If the late applicant is uninsurable due to a pre-existing health condition and benefits are denied the employer could find itself in a difficult legal position if the new hire was offered benefits as part of the compensation package.

We always instruct the plan administrator to complete and submit employee enrolment forms shortly after the date of hire.  Should the employee not work out before their waiting period is up, the employer can simply remove them from the plan and will not be charged.

Changes in marital status, addition of dependents, child birth, common-law status, or a spouse losing duplicate coverage must be reported to the insurer within in 60 days of the change.

Employers should always share these rules in writing with employees and they should form part of the corporate policy documentation.

Waiving Coverage

Many employees and some plan administrators are unaware that an employee can waive extended health and dental coverage if they have coverage through their spouse’s plan. However, some plan administrators make the mistake of allowing employees covered through their spouse to opt out of all benefits. 

Employees are only permitted to waive the health and dental if they have a partner who is enrolled in another plan. Most employees waive coverage when they were required to pay part of the premium. Where health and dental premiums are paid by the employer this would not apply.

Most benefit contracts require 100% participation by all employees. Any exceptions should be fully documented and placed in the employee’s file.

It is important that waiving coverage is done correctly. Pooled benefits such as Life, AD&D, Critical Illness, and Short & Long Term Disability are generally mandatory. Even with a signed waiver, a disabled worker or the estate of a deceased employee may look to your company to pay the forsaken benefits, potentially costing your company tens or hundreds of thousands of dollars.

Salary Changes and Long term disability

It’s the plan administrator’s responsibility to disclose pay increases, class changes, or changes in hours worked. Often salary changes affect Life and Disability Insurance amounts. The administrator needs to make sure changes are completed within 31 days and that employees be given the opportunity to apply for additional coverage even in cases where medical questions are required.

In smaller groups medical evidence is required to provide the extra protection available to the higher income earners. This must be documented by the plan administrator. For example, if an employee qualifies for $3500 per month of long term disability coverage but the maximum the insurer will offer without medical evidence is $3000, the plan administrator needs to notify the employee that they qualify for an additional $500 per month. The plan administrator will notify the employee in writing and give the employee the medical evidence form to complete and send to the insurer. If the employee does not wish the extra coverage the plan administrator needs to document this by having the employee sign a refusal document. Typically, long-term disability premiums are paid, after-tax, by the employee.

Under-reported income or incorrect classification creates a liability to the employer whereby the employer will be required to make up any shortfall in the event of a claim. 

Terminations

If severance is offered and you would like to extend benefits to these employees, it is important that the insurance company is sent a request and grants this request in writing. Most insurers will not extend Group LTD beyond statutory requirements, which differ by province, due to the fact that the plan member is no longer actively at work. There might also be restrictions on life insurance or out of country coverage. If you have stated that the benefits will be extended during the severance period without first receiving agreement from the insurance company, you may be liable for the payments associated with the benefits denied by the insurer. 

Be cautious of pending or active disability claims, and maternity or parental leave.

Potential human rights complaints from employees whose benefits are terminated prematurely can be very messy. Areas to watch out for include, pending or active disability claims, and maternity or parental leaves. Employers are required to extend benefits to an employee on maternity or parental leave. If a cost-sharing arrangement exists, the employee must be given the opportunity to pay their share of the premiums. One point to note, an employee may choose whether or not to continue with LTD premiums while on leave. Generally speaking, it is important to maintain benefits for an employee with a pending disability claim. Once an employee’s disability claim has been approved, we suggest consulting with an employment law specialist prior to terminating a disabled worker. The issues can be complex and there is no one size fits all solution.

Make sure you share information with terminated employees on their right to convert various group benefits into personal plans. Benefits available for conversion will vary from plan to plan and carrier to carrier but generally speaking group life insurance has a conversion privilege. It is important to inform employees of this right, as this gives them the opportunity to continue their life coverage even if they might not qualify for personal coverage due to their medical history. In some cases, long-term disability insurance can be converted to a personal plan and several insurance companies offer individual health and dental plans that can be obtained without requiring health information, provided that the application is made within 60 days of leaving the group plan.

HR Professional

It is best to have your corporate polices and procedures drawn up by a Human Resources professional and to obtain legal advice when necessary.