June 8, 2020
Premium Credits Related to COVID-19 and ERISA Fiduciary Rules

Has Your Company Received a Premium Credit Related to COVID-19?

The COVID-19 pandemic has significantly decreased health care utilization, as health care providers and patients have canceled appointments and postponed elective procedures. Because employees are not using their insurance benefits, some group medical, dental and vision carriers are providing employers with a credit against future premiums owed under their insurance contracts.

Employers receiving these premium credits should consider their fiduciary obligations under ERISA when determining how to apply the credits. Any credit amount that qualifies as a plan asset under ERISA must be used for the exclusive benefit of the plan’s participants.

Department of Labor (DOL) guidance on medical loss ratio (MLR) rebates generally indicates that employers must share the premium savings with plan participants based on their plan’s contribution strategy. This means that, if the employer and participants both contribute to the premium cost, the premium credit should be shared with plan participants. For example, the credit could be shared with participants in the form of a premium holiday, reduced payroll deductions or benefit enhancements.

In addition, ERISA’s fiduciary duty rules prohibit employers from retaining employees’ payroll deductions for plan premiums. These contributions must be used for paying plan benefits and expenses, and not for the employer’s own purposes. To comply with ERISA, employee contribution amounts must be forwarded to the carrier within 90 days or placed in a trust account. 

Get more details on this Compliance Alert here .

Where can I learn more?

You can learn more about other COVID-19 requirements, as well as access employer resources, on our designated COVID-19 page here . Keep up-to-date with the latest developments by visiting our site regularly.

We welcome any and all questions you have as they pertain to ongoing developments surrounding the COVID-19 situation. The situation remains fluid and we are here to help you during these unprecedented times. You can reach us here , or feel free to contact any member of the Sullivan Benefits team directly via email or at 774-369-0280.
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