Parental leave, terminations, cost-sharing. These are just some of the situations that could result in a change to your employee benefits plan.
To ensure you have the information you need to make these changes correctly, we put together this list of eight FAQs. So without further ado, here are some of your most common questions, answered.
Making Changes to Your Benefits Plan? Read These 8 FAQs First
1. Can my employees still receive benefits if they’re on parental leave?
Employees who are absent from work due to maternity or paternity leave are entitled to remain on benefits. As an employer, you must continue to pay your share for benefits if the employee chooses to continue with their premiums while on leave. If cost sharing arrangements exist, then your employee has two options:
- continue all benefits he or she pays for, except for long-term disability, or
- continue all benefits he or she pays for including long term disability.
We recommended your company request post-dated cheques for the employee’s portion during the length of their leave.
If an employee has requested a leave of absence for other reasons, such as a sabbatical, you may be able to continue their benefits, but you must get prior approval from the insurer.
2. If an employee quits, when does their benefits coverage end?
Most employer-sponsored plans state that the last day worked is the last day of coverage. It's important to know exactly what your policy provides, and ensure terminations are reported promptly.
3. Is there a conversion option for health and dental benefits?
Yes, employees who leave a group plan can purchase individual health and dental plans for themselves and their families. They can do this with several carriers. The conversion plan does not need to be with the same carrier.
Individual plans are generally less robust than group plans, but they can still offer important coverage for prescription drugs, out of country coverage, and dental visits. In order to avoid answering medical questions for the new coverage, it’s important that an employee apply for an individual plan within 60 days of leaving the employer’s plan.
Most group life insurance policies include a conversion option as well. You must submit the signed paperwork to the insurer within 30 days of the employee’s group life coverage being terminated.
It’s important that employers remind employees of this option when they give notice or are terminated, since conversion within 30 days does not require an employee to answer medical questions. This could be a very important benefit to employees with substandard health.
4. I’m terminating an employee and want to continue benefits during the severance period. Is this allowed?
Generally, an insurance company will allow you to continue benefits during a negotiated severance period (with the exception of disability, which is typically offered only for the time period required by Employment Standards).
However, it’s imperative that you seek permission from your insurance carrier(s) before you offer continuing benefits. Insurance companies are under no obligation to maintain coverage and as an employer, you could end up being responsible for any claims employees make – potentially a very expensive mistake!
5. Can employees take only some benefits?
Outside of a flexible benefits plan, employees must generally take all benefits offered through their employer’s plan in order to avoid anti-selection.
If insurance companies allowed each employee to take only the benefits that they wanted, or felt they needed, costs would rise and the concept of insurance would break down. Furthermore, if an employer allowed an employee to waive coverage outside of their plan's provisions, and the employee required coverage down the road, the employer — and not the insurer — may be liable for future claims.
An employee may opt out of health and dental benefits if they have coverage through a spouse’s plan. This is known as coverage through spouse (CTS) and is part of the enrollment process.
If you offer a flex plan, you pre-select a menu of options ranging from basic to comprehensive coverage. Once a year, employees may select from the pre-packaged menu. Employees may not change their selection throughout the year, unless a life event occurs, such as marriage or the birth of a child.
In addition, many plans will only allow an employee to move up or down one category each year, and certain categories may require a multi-year commitment. In other words, if an employee chooses the most basic coverage in year one, they wouldn’t be able to jump three or four levels to the most comprehensive coverage the following year. Changes in flex coverage options must be scaled like rungs in a ladder.
6. Can an employee pay part, or all, of the benefit premiums?
In Canada, employers must pay at least 50% of the total benefit premium per employee.
- If the employer is paying 100% of the premiums, any taxable benefits must be recorded on the employee's T4.
- If employees are contributing to the cost, the most efficient method is to have their share cover any taxable benefits (Life Insurance, Accidental Death and Dismemberment, Critical Illness, non-taxable disability plans, and other benefits depending on province of residence).
7. How often can I make changes to the group benefits plan?
It’s possible to make changes – adding, enhancing, reducing, or removing benefits—throughout the benefit year. Contrary to popular belief, it’s not necessary to wait until the annual renewal. We recommend that changes be made in response to changing demographics among the employee group, or in response to changing usage patterns and benchmarking data.
8. Can employees on a Work Visa be added to a benefits plan?
Yes, although there may be restrictions associated with long-term disability benefits.
There you have it! We hope this blog has cleared up any confusion around changes to your plan resulting from parental leave, terminations, cost-sharing or flex plan arrangements. Do you have a question we didn’t address here? Let us know in the comments, and we’ll get back to you with some answers.
It will help you learn how the right employee benefits advisor is good for business, and how to choose the best one.