Health Insurance Premiums

As you know, terminating an employee isn’t a clean cut from your responsibilities to that employee. We want to treat the employee how we would want to be treated; with respect, dignity and not left hung out to try. Even when we are working with the hard-to-deal-with employees, we must maintain the brand of the company and carry-on with professionalism. In line with those philosophies are laws, programs, plans and rules to make sure employees are taken care of at the end or through difficult times.

According to SHRM, these are the key employee benefits that need to be evaluated when considering reducing the cost of payroll. In summary:

• Don’t assume coverage continues or ends: depending on employer action to furlough, terminate or take a leave, know that plan terms will dictate coverage. “Employers that expand coverage for ineligible employees outside the terms of the plan or policy without consent from the insurer or stop loss carrier face significant financial exposure.”
• COBRA must be offered: when an employee has a reduction of hours or loss of all hours health care must continue to be offered. Cobra allows this at an increase to the employee’s premium.
• Beware the (ACA) Affordable Care Act employer penalty: SHRM states, “Terminating the group health plan coverage for an employee when a leave or furlough begins may cause an ACA penalty for failing to offer coverage to 95 percent of full-time employees. COBRA coverage must remain affordable to avoid an ACA penalty, which may require a continued or increased employer subsidy.”
• Plan continued coverage with employees: let them decide if paying directly to ACH from a personal checking account or by mail or if through a COBRA vendor is their preferred method.
  • Does any severance policy take precedence over what is offered?
  • Implications of Retirement Plans: Questions to consider…
    • Will it cause a “partial termination” under the rules of the plan?
    • Are you avoiding “deemed distributions” by following the plan loan provisions?
    • During leaves or breaks in service, vesting and contributions can still be required – is that set-up?
    • Other matches and contributions can be suspended – do I know which ones? Do I understand the ramifications?

•   Review all deferred compensation and other employment agreements for impact. As stated by SHRM, “Such agreements may have short-term bonus payouts or other incentive payment obligations due to any “termination without cause” or other “separation from service” that cannot be altered without a review of all implications of Section 409A of the tax code. These rules generally prohibit employees from making salary deferral election changes midyear (including canceling elections) and/or changing the timing of payments.”

While we may be hoping for a clean, clear cut of financial responsibility from our employees, rules and regulations ensure they are taken care of to a point. This may not help with cutting costs, but in the end taking care of your employee’s health and finances ensures you have left them on the best footing. And, leaving employees as well as you can protects your brand, your company from legal retaliation and saves you, as an individual, from the burden of worry.