Michelle Braddock, Executive Vice President
Of all the employee benefits that employers need to administer, group life insurance should be one of the easiest. However, there are a handful of common oversights that employers may make.
Salary – If your Basic Group Life or Voluntary Life programs are based on a multiple of salary, are you keeping those salaries current? Is the salary information you’re reporting to the insurance company in-line with the definition of earnings in your contract? If these things don’t align and a claim occurs, it may create problems for the insurance company or the beneficiary, affecting the amount paid.
Eligibility – With so many employees transitioning from casual to part-time to full-time and back, it is sometimes difficult to track for benefit purposes. Audit your bill periodically to make sure you’re not including anyone that doesn’t meet the minimum required hours for those benefits.
Billing/Administration – Did you know that if you are “self-billed” it’s your responsibility to insure that all coverage listed is actual? If there is a claim and the coverage listed exceeds what the employee should have qualified for, you may be responsible to pay the difference out of pocket. If the insurance company provides you with a list bill, they have the checks and balances in place to ensure that no one receives coverage in excess of the contractual rules.
Waiver of Premium – Be careful of terminating a disabled employee before checking to see if they qualify for the life insurance waiver of premium feature. This could save your employee from costly conversion premiums, when they may qualify to have their life coverage continued for free.
Conversion/Portability; Am I required to distribute these forms? – Unlike COBRA laws, there are not laws that require an employer to distribute or notify terminating employees that they have continuation rights to their life insurance. As long as their booklets or SPDs have been distributed, this is all the notification required by you. Because some insurance carriers want employers to provide this notification at termination, be sure to check with your carrier on their procedures.
Voluntary Life; Salary Multiplier – Most Voluntary Life insurance plans have a maximum coverage limit, usually a certain dollar amount along with a salary multiple. With so many employee status changes, many times a downward change triggers their voluntary life amount to become ineligible. If an employee once qualified for $200,000 of coverage at a 5 x salary limit, but his/her status change causes the salary to reduce $20,000, his/her maximum insurance amount now becomes $100,000. A periodic audit of this coverage may reduce your liability, as well as save employees money if they’re paying for coverage amounts they are no longer eligible for.
Imputed Income and Table I – And don’t for get to make sure your plans are compliant!