Group Life Insurance: Compliance Obligations Employers Need to Know

Group life insurance is a standard benefit offering for most employers.  As with all employee benefits, however, the employer takes on obligations when it decides to offer certain benefits.

If you are currently offering life insurance for your employees, here are the top three overlooked requirements:

Compliance Consideration 1: Life Insurance Conversion Notice

The state of California (and other states) require the employer to provide a terminated participant with a Life Insurance Conversion Notice within 15 days from the date the coverage ends. The terminated employee then has 31 days from the date the coverage ends in order to apply for continuation of the life insurance coverage, as outlined in the carrier contract. Please note that an employer should reference their specific carrier contract for more details.

Best Practice: Protect yourself and your company by mailing or delivering the Life Insurance Conversion Notice and Application within 15 days of the employee’s date of coverage termination.  Deliver the forms in such a way that you are able to furnish proof to protect your company from potential legal action.

Compliance Consideration 2: Employees on Leave Due to Disability

The majority of group life insurance policies include a waiver of premium provision.  This provision is an enhancement as it provides life insurance benefits without payment of premiums for those that meet certain requirements.  Please note that an employer should reference their specific contract for more details.

Employers are responsible for notifying their employees of the waiver of premium provision.  A plan sponsor (i.e. the employer) can satisfy this requirement by furnishing a Summary Plan Description to the plan participant within 90 days of their entry into the plan, as described in the ERISA disclosure regulations.

Best Practice: A conservative approach would be to include the life insurance contract and waiver of premium application in the leave of absence (LOA) paperwork process. It is also best to have an employee sign an acknowledgment receipt so that your company can furnish proof that the documents were received.

Compliance Consideration 3: Changing Life Insurance Carriers

Changing Life Insurance carriers can be relatively simple; however, a missed step could mean serious liability for the employer.

Do you have employees on leave? At the time of implementation, life insurance carriers generally cover only those employees who are actively at work.

Best Practice: Follow these steps to avoid a gap in coverage to help prevent potential liability that may arise from employees on leave while transitioning carriers.

  1. Prior to your effective date with the new carrier, terminate the applicable employees from the current group life insurance policy.
  2. Once terminated, notify the employee on leave of their right to convert the group life insurance policy. This notice must be delivered within 15 days of the coverage termination date.  To eliminate any risk, mail or deliver the conversion notice and application in such a way that you can furnish proof that it was delivered.
  3. In addition, if the leave is due to a disability, the employee should be directed to file for a waiver of premium with the current carrier.

If you have any questions pertaining to the above information or general compliance inquiries, please don’t hesitate to contact me.



About Michelle Cammayo

Michelle Cammayo has more than 13 years of Employee Benefits experience specializing in all lines of health and welfare benefits. Today, Michelle works closely with clients and partners to provide guidance in areas of the law including ERISA, HIPAA, COBRA, FMLA and PPACA. She also oversees the Compliance Department at Bolton & Company to ensure we are helping our clients manage and eliminate risk with regards to employee benefit compliance.

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