What Qualifies as Errors in Benefits Administration?
Many employers offer benefits such as health insurance, dental insurance, vision insurance, and life insurance as a convenience to employees and to help them compete for talent. When benefits aren’t administered properly, your business is exposed to the possibility of lawsuits. This can include both administrative errors, such as forgetting to enroll someone in a benefit they signed up for, and omissions, such as not providing required information about a benefit.
Errors in benefits administration are surprisingly common. Some examples of errors include:
- Inaccurately describing benefits plan and eligibility rules to employees, their dependents or family members, and beneficiaries. This can include omissions, such as forgetting to inform employees of important benefits changes.
- Improperly maintaining employee benefits files and records, including paper records and electronic records.
- Clerical errors surrounding enrollment, plan maintenance, and the appropriate addition or removal of employees, dependents, and beneficiaries from plans.
For example, if your company offers health insurance to employees but due to an administrative error fails to enroll a certain employee, you could be held liable for medical expenses if said employee is ever hospitalized. We all know how expensive health care is, so it stands to reason that these types of seemingly minor clerical errors can have serious financial consequences for a small business.
Similarly, providing misinformation to employees is another error that’s easy to make. For example, if your benefits administrator tells an employee that an insurance plan covers their daughter, but their daughter is too old and ineligible for coverage, it’s considered an error.
In today’s digital world, employers also have to be cautious about maintaining employee records digitally. In the case of data loss or accidental deletion, they could be liable for damages resulting from misplaced employee benefits files.
Even an employee who is terminated could be affected by errors in benefits processing or administration, and bring suit. For example, if you accidentally fail to provide the proper notification of COBRA coverage options to an employee who leaves the company, that is considered an error.