Very often, we as brokers, are asked “why”, if an employee doesn’t want to pay their portion of the premium or simply don’t want the coverage, do they have to participate on the group benefit plan?
In striving to make comparisons easily understood by plan administrators, sometimes, I’ve been known to compare this premium and enrolment obligation to Employment Insurance. As I understand it, as defined by the Government of Canada, when employees meet certain criteria, premiums must be paid by both employer and employee when there is a contract of service between the two. This is often referenced as a duty or obligation so the employee will have the access they require when they require it.
By the same logic, when an employer decides to implement an employee group benefit plan, they do this via a contract between them and the insurance carrier/benefit provider. In this contract, the eligibility of who will be covered under the plan is defined, along with the specific coverages for each line of benefit offered, etc. The insurance carrier/benefit provider will then create documentation outlining these terms, typically in the form of the benefit contract and booklets to be then distributed to the employees, ensuring all parties are accurately informed.
The wording may include:
You are eligible if…setting out what constitutes an eligible employee and their dependents. If there is a waiting period that will be defined. The “actively at work” clause, if applicable, will be defined. As well as when benefits will commence, as well as terminate.
Some plans, if they are not set up as “mandatory” programs from the on-set may allow for a certain percentage or number of employees to “waive” off all coverage, not just the health and dental in the event of spousal coverage. But the question comes down to how an administrator is keeping track of those numbers and what do you do when you have reached your participation limit and perhaps fall below for the insured benefits like life and disability? How can an administrator state equitability and fairly that one employee may waive off while another can’t without then running amuck of employment standards, human rights, anti-selection, and a myriad of other enforceable legislation?
The bottom line is when employers choose to ignore that they have entered in this contract agreement with the insurance carrier / benefit provider, by allowing those same employees who would and are expected to have coverage, to waive or opt off without adequate protection, ensuring the employee has received outside legal advice, and put certain measures in place to protect the corporation, is when liability issues can occur.
Some basic duties of a plan administrator (who may or may not be the employer) include:
- Contractual duties to comply with the terms of an employment and/or insurance contract and be liable for breach of contract if they fail to do so.
- To act in good faith in administrating the contract.
- Administrators owe a duty of care to competently administer group benefit plans and if they fail to do so, they can be liable for negligence
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