Benefit Plan Eligibility: Your Opportunity to Clean House

Benefit Plan Eligibility: Your Opportunity to Clean House

It is always very important, whether a retirement plan, or a welfare benefit plan, and if a welfare benefit plan, whether the plan is insured or self-funded, that plan officials make certain that all terms and conditions of the plan are followed.  Failure to follow the terms and conditions of a plan can result in plan disqualification; of particular note, is eligibility for plan benefits. 

It is important for plan sponsors to make certain that only eligible individuals are allowed to participate in their plans.  The issue arises particularly in the welfare plan arena, and specifically, with regard to dependents, or dependent-like individuals.  With the expansion of coverage to new categories of individuals, such as domestic partners, or children who do not meet the definition of dependent, the employer has an opportunity to audit its plan for purposes of ensuring that only those who actually meet the eligibility classifications of the plan are offered and allowed coverage under the plan.  Sometimes, individuals who are ineligible are inadvertently put on the plan, or individuals who lose eligibility by virtue of a change in status, are left on the plan.  Both for plan qualification and plan costs purposes, it is important that these individuals be removed from the plan. 

A recent U. S. District Court decision (Northwest Administrators, Inc. v. Cutter, No. C07-0988-JCC, 1/24/08) is a wake-up call to employees who may misrepresent their status to the employer.  In this case, an employee sought reimbursement for claims paid to his so-named spouse; when, in fact, it was determined that the couple never married.  The Court found that it would be appropriate for the plan to seek reimbursement from the employee for the claims paid on behalf of the so-named spouse. 

Employers should take heart, not so much from whether reimbursement for monies paid in error can actually be collected, but rather from the fact that the Court took a hard line against individuals who attempt to defraud a plan.

 

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

Benefit Plan Eligibility: Your Opportunity to Clean HouseIt is always very important, whether a retirement plan, or a welfare benefit plan, and if a welfare benefit plan, whether the plan is insured or self-funded, that plan officials make certain that all terms and conditions of the plan are followed.  Failure to follow the terms and conditions of a plan can result in plan disqualification; of particular note, is eligibility for plan benefits. ...2008-02-06T17:00:00-05:00

It is always very important, whether a retirement plan, or a welfare benefit plan, and if a welfare benefit plan, whether the plan is insured or self-funded, that plan officials make certain that all terms and conditions of the plan are followed.  Failure to follow the terms and conditions of a plan can result in plan disqualification; of particular note, is eligibility for plan benefits.