Issue: More employers are adding voluntary benefits to beef up their benefits lineup at little cost.
Risk: By linking such programs too closely to your organization, they could fall under ERISA coverage, which heightens your liability.
Action: Don't endorse the program or tie your firm too closely with it; follow the following three steps to avoid risk.
Voluntary benefits are an increasingly popular tool for employers seeking to improve their benefits at little cost.
Employees pay the full costs for such benefits, long-term care insurance, prepaid legal services, pet insurance, but they gain by earning group-discount pricing. Plus, they can pay through.
But you also need to steer clear of a little-known legal trap. By linking these voluntary programs too closely with your organization or its benefit plan, the firm could become liable if an employee files a suit related to the benefit.
That's because with a closer bond, it's more likely that your voluntary-benefit program will fall under ERISA coverage, which substantially raises your responsibility and potential liability.
Here are three ways to keep your distance:
1. Don't endorse a program. Explain , both orally and in writing, that your affiliation with a provider doesn't constitute an endorsement of its service.
Also, don't announce the voluntary-benefit program on your letterhead. A few courts have viewed the mere description of a benefit on an employers' stationery as a full-fledged employer-sponsored benefit plan that's subject to government regulation.
2. Schedule separate enrollment periods. To avoid linking voluntary benefits too closely to the regular benefit plan, schedule separate open-enrollment periods for each, spread apart by many months.
3. Ask for an indemnification clause. Make sure voluntary-insurance vendors include a clause in your contract that holds your organization harmless for problems with that vendor's product.
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