Does everyone have to join the benefits plan?
Just going through transferring one of my Clients from their current Traditional Group Insurance (TGI) benefits carrier to another TGI benefits carrier and as Enrollment Forms were being handed out, there were a few employees who were asking if they actually had to participate in the benefits plan.
It’s a good question considering:
- The employees of this company are picking up 100% of their Long-Term Disability premium (this way it is a non-taxable benefit, if they were to go on Disability).
- The average employee is paying around $40 per month for their LTD benefit.
So, it makes sense that the employee is asking questions about whether or not they have to participate…money is coming off their pay cheque. Fortunately for this employer, they have an HR Policy that clearly indicates that participation in their benefits program is a condition of employment.
Q. Why is it important to make participation in a benefits program a condition of employment, i.e. mandatory?
A. If an employer plays it loosey-goosey with whether or not an employee participates in the benefits program, then that employer runs the risk of taking on the role of being the insurance company.
Let’s take a closer look at how an employer can become an insurance company…
So, let’s say that the employer sees no reason to “force” the benefits program on an employee who says, “I can’t afford this.”. And, let’s take it 1 step further and say that the employer figures that they have their bases covered by having such an employee sign a “Waiver of Benefits” letter.
- If that employee were to go on Disability and had signed that “Waiver of Benefits” letter, then any lawyer worth their salt will be able to pick that apart with, “My Client did not fully understand what they were signing.”.
- The insurance company was not aware that this employee even existed and so, the employee was not part of their risk assessment of providing the coverage, i.e. not their problem.
- If it’s not the insurance company’s problem, then it becomes the employer’s problem.
- Et voila, the employer is now an insurance company! We’re talking thousands, maybe tens of thousands of dollars of liability.
Communication, Communication, Communication
Communication is the key here and the foundation to minimize liability is to have an HR Policy that clearly indicates that participation in the benefits program is a condition of employment…and is subject to change as the employer sees fit.
If you don’t do this, then you may become the insurance company.
Located in Cambridge, ON Sharkey Group Insurance provides independent Employee Benefits advice & counsel for Small Businesses across Ontario.