COBRA and state continuation participants and the rebate.
Carrier letters state that the rebate was calculated using premium from COBRA and state continuation participants as well as current employees. That raises a fairness question the employer has to answer.
What the letters and the guidance say.
Their Premium Was Counted
Carrier letters state that your rebate amount took into account the premium received from state continuation and COBRA participants, such as former employees and dependents who elected continuation coverage.
Equity Is the Employer’s Job
Carrier letters state that it is the employer’s or policyholder’s responsibility to use the rebate equitably, considering all participants on the plan, including continuation participants.
Impartiality Under ERISA
The Department of Labor states that fiduciaries must act prudently, solely in the interests of participants and impartially. Leaving out a group whose premium was counted needs a documented reason.
Three steps for the employer.
Identify Who Was on Continuation
List every COBRA and state continuation participant during the rebate year and the premium each paid. Your COBRA administrator or carrier can help.
Decide Whether They Share
Work with your adviser on how continuation participants fit into the allocation, and whether paying them is cost effective given the amounts involved.
Document the Choice
Write down the approach and the reasons. If continuation participants are excluded, record why.
Three questions to settle first.
Who Elected Continuation Coverage?
Ask your COBRA administrator for the list and the dates of coverage for the rebate year.
What Did They Pay?
Ask for the premium collected from each continuation participant for the year.
Is Paying Former Participants Cost Effective?
Ask your adviser how the Department of Labor cost effectiveness guidance applies to these amounts.
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.
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