One of the most important aspects of administering an employee benefit plan is the reporting of earnings. When you first enrol an employee in your plan, you must provide their salary information.It is equally important to report when your employees receive a raise or cost-of-living increase.
Long Term Disability, Short Term Disability and Life Insurance are benefits that are typically calculated as a percentage of an employee’s salary. If a discrepancy exists between an employee’s actual earnings and what is reported by your firm, the lesser of the two amounts will be paid in accordance with your plan’s policy. That means, in the event of a claim, your employees could receive less than they are eligible for, which could raise liability concerns for your company.
Imagine this scenario. Jane has worked for ABC firm for ten years when she is involved in a serious car accident. Luckily, Jane holds a short term disability benefit through her employee benefit plan. Jane’s salary, as indicated by her most recent T-4, was $49,000 a year, which makes her eligible for her plan’s disability benefit of $630 per week. However, the salary information on file for Jane’s benefit plan indicated her income was $40,000. Premiums had been billed and paid based on a salary of $40,000, meaning Jane’s insured benefit at 66.67% of salary was only $513 per week, almost $120 less than what she believes she is eligible to be receiving.
By providing notification of Jane’s salary change at time of increase, the above situation could have been avoided. In order to assist employers, the Chambers of Commerce Group Insurance Plan® sends a salary update form to each insured firm every January as a reminder. Report your employee’s salary changes and maximize their benefits!