by bgandy » Wed Jan 04, 2012 01:52 am
Two years ago we signed up for life insurance through our company. It was optional for each employee, but if we opted for it it was set up as a pre tax deduction. I was told today that my employer doesnt want to deal with the deductions anymore so they are going to cancel the coverage.
Does my employer have the right to do this when the policy is written to me? Can I opt to keep this policy seperatly or should I start looking for another policy?
Does my employer have the right to do this when the policy is written to me? Can I opt to keep this policy seperatly or should I start looking for another policy?
Posted: Wed Jan 04, 2012 02:29 am Post Subject:
The employer owns the group policy, so they are free to do as they wish. This is one of the reasons that group life insurance is usually a bad idea. Whether you can keep it depends if there is a conversion option available, but if there is it will be very expensive compared to what you could get on your own, assuming you are in reasonably good health.
Posted: Wed Jan 04, 2012 02:45 am Post Subject:
Thanks for the reply.
It just seemed odd that they could cancel a policy that I had to pay for without any notice
I will never join a group policy again.
Posted: Wed Jan 04, 2012 03:09 am Post Subject:
You cannot pay for LIFE INSURANCE with "pretax" dollars.
If the policy is a group policy, you will have the right to convert to an individual plan. If the policy is a "Voluntary Group Benefit Plan" you will also have the right to convert to an individual plan. If the plan is covered under ERISA, your employer may have a requirement to give you 60 days' advance notice of a termination of insurance without a replacement policy.
As dgoldenz has said, a conversion plan will be more expensive than what you had been paying. It may or may not be more expensive than what you might find from another insurance company.
The advantage of a conversion policy is NO PROOF OF INSURABILITY. But that advantage could come with higher premiums. You must act quickly, one way or the other, because you will only have about 30-31 days to apply for a conversion policy.
Posted: Wed Jan 04, 2012 03:45 am Post Subject:
I just checked my last pay stub and the life insurance premium is listed under "deductions from gross pay". Is this wrong and if so wil I get in trouble?
I will ask about the conversion policy.
How would I know if the plan is covered under ERISA?
Posted: Wed Jan 04, 2012 03:45 am Post Subject:
I just checked my last pay stub and the life insurance premium is listed under "deductions from gross pay". Is this wrong and if so wil I get in trouble?
I will ask about the conversion policy.
How would I know if the plan is covered under ERISA?
Posted: Wed Jan 04, 2012 04:09 am Post Subject:
Deductions from "gross pay" are not necessarily the same as a "pretax" deduction. State income tax would be in the same category -- it is not taken from pretax dollars. Other after-tax deductions could include union dues, disability insurance, charges for meals (for restaurant employees), etc.
If life insurance premiums were actually paid with pretax dollars, your employer is supposed to report that to the IRS.
How do you know if your plan is covered by ERISA? You have to ask your employer. If this is true group insurance, your employer has 20 or more employees on a full-time (or equivalent) basis, and is not a state or local government agency, then it is probably governed under ERISA.
Voluntary benefit plans, which are made available by arrangement with your employer for payment of premiums via payroll deduction, but not "sponsored" by your employer, are usually NOT governed under ERISA.
Posted: Wed Jan 11, 2012 09:14 pm Post Subject: pre tax life insurance
Payroll deductions are reductions that the employer makes from employees’ paychecks. Deductions are either voluntary or involuntary. The former means that the employee have consented. The latter means that a government institution imposed the deductions.
The employer has control over voluntary deductions. The employer is not legally required to offer them, and the employee does not have to agree to them. But the employer must withhold all required involuntary deductions from the employee’s paycheck. Payroll taxes are essential to the funding of federal and state programs.
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