Employees share the cost: how the rebate is split.
When employees pay part of the premium, part of the rebate may belong to them. The Department of Labor guidance explains how the participant share is tied to what they paid.
What the letters and the guidance say.
Participant Paid Premium Is a Plan Asset
The Department of Labor states that where participants paid premium, the portion of the rebate attributable to those payments is a plan asset, to be used for the benefit of participants.
Fixed Percentage and Fixed Amount Plans
The guidance sets out specific allocation rules for plans where the employer pays a fixed percentage of the premium and for plans where it pays a fixed amount. Your adviser can apply the right one to your contribution structure.
A Fair Method Is Required
Where the rebate is a plan asset, the person in control is a fiduciary under ERISA. The Department of Labor says the allocation method should be reasonable, fair and objective.
Three steps for the employer.
Gather Payroll Deduction History
Pull employee contribution amounts by month for the rebate year, including any changes to rates during the year. This is the starting point for every allocation method.
Separate the Shares
Split the premium into the employer paid part and the participant paid part, then apply the guidance to the rebate. Ask your adviser to confirm the math before anyone is paid.
Pick the Distribution Method
Cash to participants, a reduction in future premiums or a benefit enhancement are the usual options. Choose the one that fits your plan and write down why.
Three questions to settle first.
What Share of Premium Did Employees Pay?
Ask payroll and your carrier to reconcile the employee share against the invoices.
Did the Share Change During the Year?
Ask whether contribution rates, tiers or eligibility changed mid year and how that affects the split.
Who Is Making the Allocation Decision?
Ask who has authority over plan assets and whether that person has been told they may be a fiduciary.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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