You’re a great employer! You’ve set up a benefits plan for your employees, but does that mean you might be
exposed to unrealized liability? Many companies set up a benefits plan to protect their employees but is your employee benefits plan, creating a liability for your company?
Here are some potential situations that we come across that can potentially come back and blow up in your face.
1) Not everyone is participating in the benefit plan
Because benefits are expensive, some employees may opt-out of participating in the plan. Some do it because they have a spouse that has benefits already, and some feel they can’t afford to participate.
It’s ok to opt-out of the health and dental portion because your spouse has benefits, but the pooled portion (LTD, Life) should be required. In fact, it should be written right into your HR policies as a condition of employment.
If someone opts out of these pooled benefits and has an accident, the company could be held liable and compensate the company in place of the insurance company. This could be until the age of 65!!
2) If you don’t meet the participation requirements of the carrier, the carrier could deny any legitimate claims.
Depending upon the size of the organization, the benefit carrier has certain participation levels, and it’s how they base their actuarial rates. If you are a company of 15 people and the carrier requires you to have a 90% participation rate, but the company only has 75% of people participating in the plan. They could deny a legitimate claim because the company hasn’t fulfilled its obligation.
3) If you reduce employee benefits due to cost, you could potentially face a constructive dismissal lawsuit.
A company decides to pare its benefits plan back due to cost constraints. The costs of drugs are prohibitive and need to be changed. You need to ensure that no one is adversely affected by a change to the drug formulary change. You need to figure out a fair solution to mitigate against this exposure.
Privacy Laws protect the rights of individuals. Is your benefit plan a Liability to your company?
The key to avoiding such situations is all in the benefit plan design. The plan needs to be set up properly the first time. Does this raise any concerns for you?
If you want to ensure you’re doing the right thing for your employees without putting yourself in harm’s way, contact The Finish Line Group and understand why “Solutions Begin From a Place of Understanding”.
Chris Coulter is the Founder and President of The Finish Line Group. He works with business owners to leverage their businesses to increase their wealth, reduce corporate and personal taxes, create viable succession strategies, enable employee retention strategies and allow them to exit their businesses on their terms.
Chris’ passion for what he does evolve from the mistakes he made in his first business; by not diversifying his risk and not utilizing a lot of the opportunities within his business to create significant wealth. Chris found out the difficult way and now educates business owners on how to avoid many of his former oversights and ultimately control where their finish line ends.