Benefit Plan administrators know it is not uncommon to request the benefit plan enrolment information from employees, only to be declined or delayed in getting the expected paperwork or on-line enrolment completed. Employees will refuse coverage, usually mis-informed and state they don’t “need” it or they have it elsewhere.

Dispel the myths

Often, due to time leg between a benefit policy going in-force and/or change in personnel and/or leadership structure, misconceptions and misunderstandings happen. These miscommunications can hamper the on-going administration of a plan and warp, to some degree, the existing expectations of the policies.

However, once the worst has already happened, it's too late to go "back".

Coverage through a spousal plan.

When employees refuse coverage because they have coverage elsewhere , through a spousal plan (individual coverage not applicable), they still MUST participate in the benefit plan. The spousal coverage will only be applicable for health, dental, and/or health spending accounts or personal spending accounts, where applicable.

Consider your existing benefit plan . Does it offer disability coverage for spouses based on a percentage of that spouse’s earnings? Of course not. How would one employer know what another employer pays that employee? Even if that were possible, why would one employer take on the liability risk of keeping salary updated for another, non-related employer’s staff member. They wouldn’t.

Therefore, while an employee with spousal coverage elsewhere, may waive off the health and dental portion of the plan, they would need to complete the enrolment process to participate in the life, accidental death and dismemberment, dependent life insurance, and/or disability coverage, and/or critical illness insurance portion of the plan as applicable.

Always making sure the employees are active on the plan, despite waiving the health and dental, means that if their spouse ever lost their coverage, they could be added quickly and effectively to the other spouse’s plan without delay or need for medical underwriting. Consider the mass layoffs and job loss during COVID and how this became a major concern as families scrambled.

Both spouses work for the same employer.

Even when both spouses work for the same employer, the same “rules” apply. Each must participate in the “insured” portion of the plan—the life and disability—and one or the other may waive off the health and dental, but not both. They are employees in their own right and should not be discriminated against simply because they both work for the same employer.

When both spouses work for the same employer, they are usually long term, solid employees that the business relies upon. The unintended consequences of not treating both as independent employees comes up periodically.

In one such situation, the spouse who wasn’t covered, was diagnosed with cancer and had to undergo invasive surgery, then extensive treatment and be unable to work for at least eight months or longer. The employer “assumed” they BOTH had coverage because of the spousal arrangement, and their common employment would suffice.

There is no life insurance, or disability coverage for this spouse.

The employer now has the obligation to relay this information to long term, loyal employees.

The employee just doesn’t want to participate.

They have no need for insurance.

Many employees wrongly believe that if they have life and/or disability insurance through their bank or financial institution attached to a mortgage or a loan that they are somehow covered. That is not the case. The mortgage or loan is covered—the object—not the person.

In these situations, many employers, or plan administrators think that if they simply have the employee sign an in-house “waiver” all is protected in the event of an issue. This has, in our opinion, many liability risks, including, but not limited to:

• Was the waiver drafted by a lawyer? Your lawyer, working in your best interests.
• Was it witnessed by a party outside the business?
• Can it be confirmed that the employee wasn’t under duress when they signed?
• Did the employer coax them to sign this in order to save money—the premium?
• Are the employee’s estate and beneficiary aware of this waiver and what it will mean to them in the event of the employee’s death or disability, especially when many times there is no other coverage in place?
• Is the employer positively sure this will hold up in court if it is contested when an incident happens?

In one such case with an employer client, when the beneficiary came knocking after their spouse had tragically died in a car accident. Imagine their surprise when they discovered there was no coverage. The spouse had no idea of the "waiver” of the insurance. Why would they, the beneficiary argued, when they had no other insurance coverage.

The employer, not the insurer paid the life insurance in full.

Incorporate the contractual obligations into the corporate policy.

Ensuring that the group insurance provisions are incorporated into the existing corporate policies saves not just time, energy, and money, but it sets everyone up for success by working off the same information and common language. The plan may or may not be contractually mandatory through the existing benefit insurance, but a corporation can make the plan mandatory through their in-house corporate policies and ensuring that these are reviewed by a lawyer.

Additionally, when employees push the issue of non-participation, encourage them to go to a lawyer on their own dime and have a waiver completed which will hold harmless the corporation in the event of the employee’s death or disability. This will ensure the waiver is completed legally, usually signed by the beneficiary and will form part of the employee’s estate plan.

In every situation—100% of the time—this has made the employee re-think their position. On the few occasions when an employee has had the “talk” with a lawyer, especially when they are footing the bill, usually including their spouse in the discussion, each and every time, employees have come back more engaged in the benefit plan and often become the biggest advocate.

We’d be pleased to engage in a meaningful conversation on this and other benefit topics. Give us a call.

Note: this was written without the aid of Artificial Intelligence (AI)

Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting, and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.

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