Former employees and ended plans: what to do with the rebate.
A rebate can arrive after a plan has ended or after people have left. The Department of Labor guidance still expects the policyholder to handle it carefully.
What the letters and the guidance say.
Policyholder Duties Continue
The Department of Labor states that where the issuer can locate the policyholder of a terminated plan, the policyholder must follow ERISA’s fiduciary rules in handling the rebate.
Check the Plan Document
The guidance says to check the plan document for how assets are allocated when the plan ends. That language may decide who is entitled to the rebate.
Silence Calls for Judgment
If the document is silent, the Department of Labor says the policyholder may need to assess whether distributing to former participants is cost effective.
Three steps for the employer.
Locate the Plan Document
Find the plan document and any amendments, and read the termination and asset allocation provisions before deciding anything.
List Former Participants for the Year
Identify who was covered during the rebate year and how to reach them. Their coverage period and premium paid will shape any share.
Weigh Cost Against Amount
Compare the cost of finding and paying former participants against what each would receive, and write the comparison down.
Three questions to settle first.
Does the Document Address Termination?
Ask your attorney to read the document and tell you how it treats leftover plan assets.
Can We Reach Former Participants?
Ask HR whether current contact details exist for people covered during the year.
What Would It Cost to Pay Them?
Ask your adviser to estimate the administrative cost against the amounts owed.
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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