Improper Employee Benefits Administration Could Lead to These Costly Claims

Posted By: Team Moody,

Are you sure you are properly administering your employee benefits? 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 are not administered the proper way, your business is exposed to an array of lawsuits. Improper administration can come in many forms such as simple errors or omissions. Improper benefits administration is surprisingly all too common. Take note of these employee benefits claims examples that could lead to costly lawsuits.

Inaccurate Description

Inaccurately describing a benefits plan and eligibility rules to employees, their dependents or family members, and beneficiaries can cause significant issues. This can consist of omissions, such as forgetting to inform employees of important benefits changes or providing misinformation to employees.

If your company offers health insurance, but due to an administrative error fails to enroll a particular employee, your company may be held liable for medical expenses if said employee becomes hospitalized. These types of seemingly minor clerical errors could have serious financial consequences on your business and you must be prepared to face them.

Improper Maintenance

Poor maintenance involves improperly maintaining employee benefits files and records, including paper records and electronic records.

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 must be very cautious about maintaining employee records digitally. In the case of data loss or accidental deletion, your company could be held liable for damages resulting from misplaced employee benefits files. Even an employee who is no longer with the company could be affected by errors in benefits processing or administration, and bring out a lawsuit.

Enrollment and Other Plan Errors

It is up to your company to remain as accurate as possible in efforts to avoid lawsuits but a slip up here and there is sometimes inevitable. Clerical errors surrounding enrollment, plan maintenance, and the appropriate addition or removal of employees, dependents, and beneficiaries from plans do occur.

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. Use these employees benefits claims examples as a means to help you stay prepared and avoid the risks.