Companies often offer employee benefit plans to help attract and keep employees. Companies need to be aware of the liability exposure created from the management of these plans.

As a requirement of the Employment Retirement Security Act (ERISA), a fiduciary of an employee benefit plan must act in the best interest of the participants and beneficiaries. Under ERISA, a Trustee/Fiduciary can be held personally liable for the companies Retirement Plan, or Welfare Plan (including medical, dental, life and disability).

Fiduciary Liability Insurance helps protect personal assets, and provides defense for the legal liability arising from claims for alleged failure to act prudently. Fiduciary Liability Insurance is not required by ERISA, but every company that offers any type of employee benefits plan should carry this insurance which is readily available.

A Fidelity Bond is a form of insurance for dishonest situations. When dishonest administrators or trustees have financially harmed an employee benefit plan, these bonds may be used, but only for the benefit of the plan and the plan’s beneficiaries. This bonding insurance will not protect the trustees themselves from liability claims and is completely distinct from fiduciary liability insurance.

ERISA requires that qualified retirement plans have a fidelity bond to cover at least 10% of the total value of plan assets (calculated at the beginning of the plan year), with a minimum bond requirement of $1,000 and a maximum bond requirement of $500,000 ($1 million for a plan that holds employer stock). This bond should be obtained through an insurance broker, and this requirement is not waived for any reason. Fidelity Bonds can be purchased individually or can be added as an optional coverage to a Business Owners Policy (BOP).

Note: A one-participant plan, which is a plan that covers only the sole owner of the sponsoring business, the sole owner and his or her spouse, or partners in the sponsoring partnership and their spouses, is not subject to ERISA, and therefore has no bonding requirement.

HCP National is not a law firm and does not provide legal advice. We are an insurance brokerage and risk manager. We encourage everyone to consult with their own attorney, certified public accountant and tax professional on any issues involving specific facts, persons, circumstances or situations.

Some things to consider when implementing a group health insurance plan.
There are not that many red flags when it comes to group health insurance; all health insurance is heavily regulated by the state so there are a few gotcha items. The only one that might apply is a pre-existing limitation which limits coverage for medical conditions that an employee received treatment for prior to coming onto the plan.

If you run into this with any of your employees, there is a way around it. If the employee had medical coverage from another group health insurance plan prior to coming onto your plan, they can request from their former plan a Certificate of Group Health Coverage (CGHC). Under HIPAA (Health Insurance Portability & Accountability Act) if they present a CGHC to your new insurer, and if they met the pre-existing condition limitation on their former plan then they will not have to meet a new one under your new plan.

If you do not plan to pay for 100% of the employee and family premiums, you will want to buy a section 125 premium only plan document (one-time fee of about $300). By having this document all premiums that your employees pay can be deducted from their pay checks on a pre-tax basis. Aside from the employee tax savings, this also lowers their gross taxable salary so you can save money on payroll taxes.

In terms of group insurance health plans ask your broker for quotes from every health/HMO insurance company in your area. I would recommend that you consider either high co pay HMO which will cost $25 to $40 for office visits and a hospitalization co pay as well, or a high deductible health plan.

High deductible health plans (HDHP) are a good option because it allows the employee to have medical coverage for the high end losses and pay for the smaller items themselves. If you do a HDHP I would definitely combine it with a HSA (Heath Savings Account) or HRA (Health Reimbursement Account).

HSA allows the employer to contribute and the employees can contribute on a pre-tax basis to the HSA account (again everyone saves on taxes like they do on the 125 premium plan document). This money can be used to pay for the employees out of pocket expenses as they meet their deductible. The HSA also can be used for other healthcare expenses such as dental, vision and chiropractors. The bank who handles the banking for the HSA will issue a debit visa card for the employees to use to pay for these expenses.
If you have Kaiser in your area, then check to see if they have an HSA. If they do then it is the cheapest deal. From my own experience, I find Kaiser to be the best healthcare model available. Ask for a tour of the Kaiser facility. You will be surprised.
HCP National is not a law firm and does not provide legal advice. We are a group health insurance broker and risk manager.