Recently, insurance carriers across the county notifying employers that they will be receiving premium credits. This is because of reduced utilization of benefits due to COVID-19 stay at home or quarantine orders issued by a local, state, or federal agency.
These premium credits are not to be confused with Medical Loss Ratio (MLR) rebates, but employees are asking how to use or distribute these credits. Like the MRL rebates, a determination must be made as to whether these credits are “plan assets” under ERISA.
The plan document will usually determine whether these types of rebates or credit are plan assets. If the plan documents are unclear, the Department of Labor (DOL) looks at how premiums are refunded. Simply said, they look at the proportional ratio of contributions made by both the employer and the employees pay all or part of the premiums, the employer cannot profit from those payments.
The premium credits are a bit easier to deal with because no cash is being sent to the employer. The credit is being applied towards future premiums due. So, in order to make sure that the employees benefit from that credit the employer can suspend employee payroll deductions and apply the credit until exhausted. If the credit is not enough to completely suspend the contributions, then payroll deductions can continue making sure all credit amounts are applied to premiums. Employers contributions can also be suspended until their portions of the credit is used.
If the carrier issues a refund to the employer and it determined that employees contributions are a plan asset, a distribution method back to those employees needs to be put in place. That can take the form of:
– A benefit enhancement to the plan
– A premium reduction (as discussed above)
– A refund back to the plan participants
Cosmo Insurance Agency is a full-service independent insurance agency based in Hackensack (Bergen County) and Lakewood (Ocean County), New Jersey that offers an all-encompassing range of insurance options for both individuals and businesses. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating our knowledge of the insurance guidelines for healthcare, employee benefits, life insurance, self-insurance, dental, disability, and long term care insurance, we keep our clients up-to-date with affordable plans that cover all their specific insurance needs.
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Source: BenefitMall
