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Sweat the Small Stuff
Protect your staff by avoiding these common "paperwork" mistakes by administrators

Let's be honest: Paperwork can be tedious. Those who administer employee benefit programs seem to face a new form at every turn. Each change to a plan seems to be matched by the need to complete yet another memo.

But documents like these represent far more than a paper-shuffling exercise. The details on every form or letter will have the final say on whether employees receive the coverage they expect and deserve.

Unfortunately, program administrators often overlook the ongoing updates that need to pass between employers and their benefit providers.

Life Insurance benefits offer a perfect example of the challenges that can emerge. These benefits are often based on a year of annual earnings. But the administrators who oversee group benefits plans need to notify insurers about changes to an employee's salary if there's any hope of maximizing the payments.

Picture someone who is hired at an annual salary of $50,000 before receiving a promotion and a $10,000 raise. If the insurance company isn't notified about the change, a beneficiary will only receive $50,000 if the employee dies. Information like this can also affect Long Term Disability benefits.

Depending on the number of employees in the plan, a benefit program might pay a disabled worker $1,500 a month. But someone making more than $27,000 a year may need to submit proof of their insurability to be eligible for 2/3 of their actual salary.

Changes to personal information are hardly limited to salaries or medical information. A young employee may list a brother or sister as a beneficiary when they're first hired, and may be surprised that benefits don't automatically shift to a spouse after a marriage. (Or, for that matter, they don't shift back to siblings or other beneficiaries after a divorce.) Any change in status – whether it involves a marriage, divorce, separation, birth of a child, change in salary or hours worked – has to be sent to a benefits provider within 31 days. Otherwise, coverage is at risk.

The same attention to detail even needs to extend to employees who are leaving a company. A departing employee has just 30 days to “convert” their group life insurance to an individual plan without submitting any medical evidence. If that window of time is missed, they will need to meet new medical requirements to secure the coverage. This means someone who has cancer or another pre-existing medical condition could miss out on the chance to hold on to their life insurance.

Administrators can help to protect these employees by including the offer to convert life insurance in the checklist of steps which guide every exit interview.

Some details in the early paperwork will even help to protect the benefits offered to everyone who participates in a program. For example, employers who place a reasonable cap on the number of years that someone can be paid a particular health or dental benefit will help to protect their other employees from skyrocketing rates which have been known to bring unprotected programs to their knees. The related policies simply need to be in place and approved in writing by everyone in the plan.

Formal policies and paper trails can help to ensure that important details like these are never overlooked, as long as the related tasks are also assigned to a specific administrator.

One effective tool for tracking all the related paperwork can come in the form of a central binder filled with insurance contracts, booklets, enrolment forms, details about altered coverage, as well as copies of memos and letters to employees covering every change. Signed waivers filed between the binder's covers can clearly identify those who decline any optional coverage, while a signed and witnessed annual review will ensure that everyone understands any changes to a plan.

Of course, anyone can file a lawsuit against the company for any reason, and employers can be held liable if someone is denied coverage because of anything from a late application to failing to report changes in salary. But the right procedures – along with Benefits Administrator Liability Coverage on the employer's insurance policy – will help to protect those who watch over the plans, as well as those who expect to be covered.

Top Tips:

  • Tell insurers about changes to an employee's salary right away. The wrong information could lead to lower Long Term Disability benefits or Life Insurance payments.
  • Employees have just 30 days to "convert" group Life Insurance to an individual plan. After that, they will need to submit medical evidence and could be denied coverage because of a pre-existing medical condition.
  • Set formal policies to keep on top of issues like changes in beneficiaries or coverage.
  • Keep a central binder that includes all related paperwork. 
  • Any changes to a plan need to be clearly communicated to everyone involved in a timely fashion.
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