Guidance for Employers on Medical Loss Ratio Rebate Checks, Free Webinar August 7
Members may receive a Medical Loss Ratio rebate check mailed recently from their insurance carriers.[i] Your treatment of this rebate check may be more complex than apparent. Generally, you have 90 days to make your determination and payments, if appropriate.
Employers who are state or local governments or church plans are exempt from the Employee Retirement Income Security Act (ERISA), and the following information would not apply. These exempt employers should instead refer to HHS Guidance, 76 Fed. Reg. 76596 (Dec.7, 2011).
Due to ERISA complexities, what to do with the refund depends on several factors. As a service to members, MSEC will be hosting a free webinar on August 7 at 1:00 p.m. to review those factors and assist you in considering your options. We invite you to bring questions with you for this webinar. Click here for more information.
In the meantime, be aware that:
· If the rebate check is de minimis (which the IRS has stated averages under $20 per employee[ii]), there is no need to provide employees refunds.
· If $20 or larger per employee, the rebate may well be considered a “plan asset” under ERISA[iii], and employers must follow fiduciary requirements in deciding what to do with the rebate.
· Insurance carriers are sending notices to your participants that you (their employer) will be receiving this rebate. The letters to employees are just beginning to be received, and as such, your employees may come to you with questions this week.
· ERISA requires fiduciaries to act in the best interest of the participants (not the employer) and to document their deliberations before making a decision. Considerations include:
o How many plans the employer offers
o The contribution split between employee and employer if shared
o Whether employee contributions were taken pre-tax or after tax, as rebate checks may be taxable compensation; other uses may trigger imputed income
o If refund checks are issued, whether or not you consider terminated employees
o How to handle COBRA participants
o Whether language in your insurance contracts or plan document directs the disposition of your rebate
[i] Rebates are from insurance carriers where the carrier spent less than the targeted 80% of each premium dollar paid on medical related claims (or 85% for large employers) during the 2011 year.
[ii] 45 CFR sec 158.243(a)(1).