ERISA sets uniform minimum standards to ensure employee benefit plans are established and maintained in a fair and financially sound manner. In addition, employers have an obligation to provide promised benefits and satisfy ERISA requirements for managing and administering those plans.
Meeting eligibility requirements
Insurance carriers require a minimum participation percentage from employees, usually in the range of 50-75 percent. A 50 percent participation requirement means that at least half of an employer’s entire workforce has to enroll in the carrier’s plan.
Adverse selection refers to the tendency for employees who need health insurance the most to seek insurance. In order for carriers to remain financially stable, a balance of healthy participants are needed to counteract the effects of those who have high health care costs. Ensuring your employee population meets carrier participation requirements guarantees that your business will receive the most cost-efficient insurance rates.
Employers can save money by conducting plan eligibility audits and enforcing existing policies.
Monitoring eligibility
Benefit plans generally involve non-taxable dollars, so there are significant penalties for non-compliance. Each plan is required by law to clearly spell out eligibility requirements. Once an employee has met the eligibility criteria, the employee must be given the option of participating in the plan. Most employers have policies and procedures outlining eligibility for their employees and dependents. However, employers risk losing valuable revenue when ineligible dependents are mistakenly covered under the employer-sponsored plan.
