Just how do employers know their benefit plan has the financial integrity to not be taken advantage of via fraud or other forms of mismanagement?
While some organization will hire outside practitioners to complete a full financial audit of all of their benefits, including not just the benefit plan, but vacation, pension, severance, profits, policies, etc., many benefit consultants include a full analysis of the benefit program within their scope of practice for the annual review of the program.
Regardless of the size of the organization, a benefit plan audit keeps the leadership team abreast of compliance, liability errors, both internal and external, areas for streamlining coverage, unnecessary coverage, and fraud opportunities, which may impact the cost and value of the plan.
Beyond simply identifying the claims verses premium usage on a plan year-over-year, a solid analysis looks to understand the duties of the employees, how they are paid, the purpose and role of offering benefits, and how all of these align for overall job satisfaction. This will be the first indicator of whether the coverage options meet with the expectation of the participants.
Going in prepared to have these discussions means identifying, as in one situation where there was a segment of staff considered self-employed through their own professional corporations. Yes, these professionals were entitled to benefits, but not income-related benefits like long term disability. Unfortunately, the company had been including this coverage for years, paying premium for staff who could never have collected had they had a disability. This may have also impacted how those with their own PC purchased individual insurance. Through the comprehensive analysis, the coverage was removed, policies were updated, staff were informed, and communication continues.
And there are the tax implications of a benefit plan which if not addressed will create unnecessary, unintended financial burden for some. Without an audit and the subsequent conversation to follow, an employer may have set up a disability program for staff that is under the terms of the contract, considered non-taxable, but yet the business has paid 100% of the premium for employees for the length of time the plan has been in place. Once an employee makes a disability claim and finds out the benefit is taxable is NOT the time to discover the financial error. Remember, if the employer pays for the disability premium, the employee will be taxed at the point of claim.
By following plan performance from not just one year to three years, but for the length of time a client is a client, for however long that is (perhaps decades) we were able to identify an anomaly in claiming activity within the health care portion of the plan. Standing outside the regular chiropractic, physiotherapy, massage claims that were usual to this customer, tens-of-thousands of dollars was claimed in health service items. For ten years prior the claims in this area had been steady and predictable and then they skyrocketed.
Working with the client and the provider, we identified areas of concern and monitored this for the next year. By the second year, fraud was determined, and authorities informed. Due to the comprehensive nature of the analysis, the claims experience was removed from the client’s claiming history and their rates were not impacted. The fraud in this scenario was not the fault of the employees, as the investigation proved, but a practitioner. This opened up the ability for targeted communication on the topic, better awareness of what to look out for, and involving all stakeholders in the well-being of the program as a whole.
Further, an annual comprehensive analysis will identify staff and dependents who may have been missed being added or removed from coverage. Life changes of a new babies or recent divorces which both impact cost and coverage parameters are often over-looked or missed altogether. On one occasion, we were able to identify an employee who had waived the health and dental in their current employment, in favour of a former employer. Yes, for years the employee had been making claims as though they were still employed under an old benefit plan because that employer missed terminating this employee’s coverage.
Tragically, if an employee (or dependent) is missed for their enrolment on the plan, they run the risk of being deemed a late applicant, have to undergo medical underwriting and may in fact be either limited or declined coverage altogether. This will impact the corporate liability in the event of an excess pharmaceutical, disability, or death claim.
Working in line with the corporate policies, a thorough review will open conversations on the employer’s obligations on how long to retain health and dental benefits in the event of a disability claim from a staff member, for instance. It is not prudent or responsible to wait until the event to make this decision.
With the mass change in the dynamics of a workforce from in-person to remote, understanding how policies and benefits align in overall compliance to limit liability is a key value-add to any consultant’s practice.
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Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting, and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.
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Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.