Plan Election Changes

[Guest PEMAQUID95]

Newly eligible employee completed company designed plan election form, selecting health plan and authorizing health insurance deductions pre-tax. However, the employee never completed insurance application and was thus never enrolled in the plan selected on company election form. Deductions (pre-tax) have been taken since the effective date of eligibility (3/1/10). Employee has decided that he now wants to opt out of medical coverage because he never got his ID cards. We think we should leave it up to the insurance company to help us fix our error by making the decision to back-date and enroll the employee, or deny and we refund the premiums (taxable) that we have taken since 3/1/10. Thoughts anyone???

[LRDG]

PEMAQUID95, based on your post, it appears you are on the right track for Sec. 125 compliance. Prompt the the insurer that you need to clear the matter administratively. What is insurer's practice for incomplete apps, 30/60/90 days for unresponsive applicant? Prompt insurer to decline issuing the policy/deny coverage based on the incomplete app. Document w/writen advisory from insurer and EE for your records and issue refund less tax withholdings; correct your payroll system, in addition to amending any required filing complied w/throughout the period of time.

Some insurers will issue the policy w/exclusion rider for coverage specific to the incomplete portion of the app, which may or may not result in a premium adjustment. If the rider is acceptable to the applicant, or the applicant doesn't decline the policy w/exclusion rider, premium deduction refund/adjustments, payroll records, amended filings should be handled accordingly.

edited to add: Amend the EE enrollment form for either premium adjustment or policy denied, per the insurer w/documentation.