A very small rebate still needs a decision.
A small check does not remove the employer’s responsibility to decide how it is used. The Department of Labor guidance allows the cost of paying out to be weighed against the amount.
What the letters and the guidance say.
Cash Is Not Always Required
The Department of Labor states that distributing cash is not required when it is not cost effective, such as for very small amounts or where it would create tax consequences for participants or the plan.
Costs May Be Weighed
The guidance states fiduciaries may weigh the cost of a method against the benefit to participants when choosing how to use a rebate.
Other Permitted Uses
The plan may apply the rebate toward future participant premiums or benefit enhancements instead of paying cash.
Three steps for the employer.
Compare Cost to Amount
Estimate what it would cost in time and fees to calculate shares and issue payments, then compare that to the total rebate.
Choose a Permitted Alternative
If cash is not cost effective, consider applying the rebate to future participant premiums or a benefit enhancement for the same participants.
Record the Reasoning
Write down the amount, the cost comparison and the method chosen. A short note is far better than none.
Three questions to settle first.
What Would Paying Out Cost?
Ask payroll or your administrator for the real cost to calculate and issue each payment.
Is There a Better Use for Participants?
Ask your adviser whether a premium reduction or enhancement serves participants better.
Who Signs Off?
Ask who has authority to approve the decision and make sure it is recorded.
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.
An independent employee benefits consulting firm. We look at the entire benefits program: cost, plan performance, risk and administration.
Switch to CFH. Unhappy with your broker? Your employees won’t notice. You will. →
Cookies on This Site
We use cookies to keep the site working properly and to understand how it is used. You can decline anything that is not essential. See our Privacy Policy for the detail.
- Essential: needed for the site to load and for you to move around it. These cannot be switched off.
- Analytics: tell us which pages get read, so we know what is worth writing more of.
- Advertising: set by third parties such as ad and social platforms to measure and target campaigns.