If your group benefits plan includes mandatory participation, it’s crucial to ensure all eligible employees are enrolled.
While it may seem flexible to let someone opt out, doing so can lead to serious consequences— including financial liability for the employer.
Why Most Group Plans Are Mandatory:
Group benefit plans are based on the principle of risk sharing. Insurers offer competitive rates because the entire eligible employee group is expected to participate. When someone is left out, it weakens the pool and creates risk.
What Happens if You Don’t Enroll Everyone?
Employer May Be Liable for Claims If an employee who was eligible but not enrolled passes away or becomes disabled, the employer could be held financially responsible. This includes life insurance payouts and long-term disability (LTD) benefits, which can reach into the hundreds of thousands of dollars.
Legal and Compliance Risk If an employee wasn’t given the opportunity to enroll or wasn’t informed about the mandatory nature of the plan, this could expose your company to legal action.
Plan Integrity and Pricing Can Be Affected The insurer may view non-enrollment as non-compliance with plan terms, possibly affecting your rates or renewal terms.
Best Practices
Ensure all eligible employees are enrolled as soon as they qualify for the plan.
Communicate clearly that the benefits plan is mandatory (unless waived due to spousal coverage).
Keep signed waivers on file if an employee declines certain benefits due to alternative coverage.
Review enrollment regularly to make sure no one has been missed.
