How to Setup Group/Voluntary Life and AD&D for a Benefits Plan

Group/Voluntary Life and AD&D

This section will provide information to setup the following product types, as the plan setup features are the same for all of the following plans:

• Group Life
• Voluntary Life
• Group AD&D
• Voluntary AD&D
• Group Life/AD&D
• Voluntary Life AD&D

Best Practice

1. Set up Group plans, if benefit offering meets the following conditions:
   1. Usually company pays 100% of the cost and employees are required to enroll in plan.
   2. Benefit structure is typically a fixed amount (either a flat $ amount or multiple of employee’s salary).
   3. Usually only covers employees, but some companies may also offer dependent coverage.
      1. If plan includes option to cover dependents, company usually doesn’t pay dependent costs -- employee’s coverage would be free to the employee, but employees would be charged an additional cost if electing dependent coverage.
   4. Usually has benefit reductions rules for older employees (benefit amount reduced by 50% at age 65).
   5. So employees don't have the option of waiving, select Required Enrollment for company-paid Life/AD&D plans.
2. Set up Voluntary plans, if benefit offering meets the following conditions:
   1. Coverage is optional and usually employee pays 100% of the cost.
      1. Some companies may offer to pay a % of the cost or pay 100% of cost up to X benefit amount, then employee is responsible for paying the cost of anything above that.
   2. Benefit structure is typically increment amounts between a min and max amount, and employees have an option to choose the amount they would like to enroll.
   3. Usually includes coverage for employees and dependents.
   4. Carrier usually includes a Guaranteed Issue amount, which is a lower amount that employees and dependents can elect and be automatically approved for. If employee/dependents want to elect coverage OVER that amount, they must complete an Evidence of Insurability (EOI) form (medical questionnaire) and submit to carrier for review. Based on risk, carrier can approve or deny the additional amount.
   5. Usually has benefit reductions rules for older employees (benefit amount reduced by 50% at age 65).
   6. Required Enrollment should not be selected since the plan is Voluntary.

NOTES: Employer-paid Life with AD&D plans can be added separately in the Group Life plan type and Group AD&D plan type. However, if employees automatically receive AD&D and at the same coverage amount as Life, combine into one plan and add as Group Life/AD&D.

Life and AD&D plans can be added separately in the Voluntary Life plan type and Voluntary AD&D plan type. However, if employees automatically receive AD&D and at the same coverage amount as Life the best practice is to combine into one plan and add in the Voluntary Life/AD&D.

Group or Employer/Company-paid Life and AD&D is generally offered to employees only. However, some plans do include optional dependent coverage. This system can handle both user cases.

You can setup one single life or AD&D or Life/AD&D plan instead of creating separate supplement plans for dependent.

Life & AD&D - Eligibility Setup

Eligibility Options

Select Domestic Partner’s enrollment eligibility to Yes or No.

Children Eligibility age range can be set up from X days to X years. If dependents are not eligible for coverage leave these dependent age fields blank.

Eligibility Rules

Like all other plans eligibility setup, you can set up plan eligibility to all employees or based on employee groups such as location, job class, departments, divisions etc.

New Hire Waiting period, termination rule, Newly eligible Rules and Rehire Rules can be set up the same as other plans.

Life & AD&D - Coverage Setup

Coverage tab includes setup of the following:

1. Coverage Options
   1. Employee Benefits
   2. Spouse Benefits
   3. Child Benefits
2. Additional Coverage Options
   1. Guaranteed Issue
   2. Benefit Reductions

Coverage Option

Select coverage options for spouse and child dependents. If dependents coverage is selected, then setup rule if dependents can enroll without employee enrolling for the plan. This will allow dependents to enroll into the plan without employee enrolling for it. This will be useful to create dependent supplement plans.

Employee Benefits

Benefit Amount can be the same for all employees or could be setup differently based on employee groups such as location, job class, department divisions.

Employee Benefit can be set up as a:

• Flat Benefit Amount
• Increments - Fixed or Custom
• Multiple of Earnings

Flat Benefit Amount

Employee will receive a flat dollar amount (defined amount) as a benefit coverage. Employee will not have an option to change coverage amount.

Increments - Benefit Amount

Employees can elect the coverage amount they want between a min and max amount. Maximum benefit amount can be set up as a dollar amount or X of employee’s earnings. If X of employee’s earnings has been selected, Maximum amount will be calculated as the lesser of defined max dollar amount or times of earnings. When X of earnings is selected, you can set up max benefit amount with a rounding rule to either:

• Round to the nearest increment amount.
• Round down to the nearest increment amount.
• Round up to the nearest increment amount.

Employee has an option to select benefit amount between these min and max amount, but the benefit amount will be based on the fixed increments or User can set up custom increments.

Fixed Increments

Coverage amounts are “fixed” increments between a min and max amount. Example: Employees can elect coverage in $10k (fixed) increments between a minimum of $10k and maximum of $500k ($10k, $20k, $30k … $500k)

Custom Increments

Instead of a fixed increment amount, the user can set up custom increment amounts between min and max amount. For custom increments, max benefit will be the highest increment amount listed. User can also set up max benefit as a multiple of earnings. If this is configured, max benefit will be the lesser of the highest increment or X of employee’s earnings.

Multiple of Earnings Benefits Amount

Coverage is either a fixed multiple of the employee’s salary with no option to elect amount they want (only 1 multiple entered), or employee can elect coverage amount they want as multiples of their salary (>1 multiple entered)

If only 1 multiple of earnings value is entered, then employees will be auto assigned a benefit amount that is X their salary if they enroll in plan. Enter more than one multiple to allow employees to elect benefit amount in multiple of earnings. If >1 multiple of earnings values are entered, then employee can elect whichever multiple of salary amount they want as coverage.

Min and max benefits are always a flat dollar amount.

Rounding Rules: Employee [Election amount, Salary] should be [rounded, rounded down, rounded up] to nearest $x (x = any positive numeric value).

Election amount = first calculate employee multiple of earnings based on exact salary amount, then round benefit increments

• Example: Employee’s salary is $55,450. Calculate 1-3x earnings first ($55,450, $110,900, and $166,350), then round to nearest $1000 ($55,000, $111,000, and $166,000)

Round to nearest = If amount is $499.99 then round down. If amount is $500.00 and above then round up.

Salary = first round employee’s salary, then calculate employee’s multiple of earnings based on rounded salary amount

• Example: Employee’s salary is $55,450. Round employee’s salary to nearest $1000 first ($55,000), then calculate 1-3x earnings first ($55,000, $110,00, and $165,000)

NOTE: If an employee's earnings changes in the mid year, currently, system supports change in benefit amount only during the next policy year.

Edge case 1 → Employee’s annual salary is less than the minimum benefit: Employee’s annual salary is 40k, which is less than the plan minimum of 50k. So, first benefit option should be plan minimum of 50k, and then other options should be the correct multiples of salary. So, options would be 50k (plan min), 80k (2x earnings), and 120k (3x earnings).

Edge case 2 → 1 or more multiple of employee’s earnings are greater than the max: Employee’s annual salary is 120k. So benefit options are 120k, 240k, and 360k. But 3x earnings is greater than the plan max of 300k, so this benefit option should not be available to the employee. They should only have option to choose between 120k or 240k.

Spouse Benefits / Child Benefits

Spouse and Child Benefits can also be set up as Flat Benefit amount, Increments or % of employee election. Both Flat Benefit amount and Increments can be set up same as employee’s Benefit. The only change is max benefit amount in increments can be a Dollar amount or % of employee’s election. If dependents are allowed to elect benefits without employee then % of employee election will generate an error.

Example: Employee elects $100k for himself, so his spouse can only elect up to $50k (50% of his benefit)

NOTE: max % of employee election is not in an increment supported by plan: Employee elects $50k for himself, so 50% would be $25k. But plan says that spouse must elect in $10k increments, so her max would be rounded down to the next $10k increment (which is $20k). Her options would be $10k or $20k.

Additional Options

System supports additional coverage options such as Guaranteed Issue amount set up and Benefit reductions. However, currently system doesn’t support mid-year benefit reductions.

Guaranteed Issue - This is an approved amount an enrollee can get coverage without providing Evidence of Insurability (EOI). If enrollee elects coverage amount greater than approved amount, enrollee needs to provide EOI to the carrier. Enrollee’s coverage amount will remain as approved (GI Amount) amount until carrier approves additional amount. System will calculate premium based on approved coverage amount until HR Admin or Broker marks this additional pending amount in the system as described in MANAGE EOI section of this document.

Guaranteed Issue Amount can be a flat dollar amount or X of earnings. If you select both options, system will calculate Guaranteed issue amount as lesser of dollar value or times of earnings.

Open Enrollment Increases can be setup as an Additional amount or up to a flat dollar amount or both. The system will allow you to increase benefit amount during open enrollment based on this settings.

Benefit Reductions - Once employees and spouses reach a certain age, carriers will reduce their elected benefit amounts because they are at greater risk for claims. When Benefit Reductions is checked, an additional field → Benefit Reductions Become Effective on will be displayed. Currently, the system supports benefits reduction calculations only at the policy anniversary (during the next open enrollment). Mid-year reduction is not supported by the system.

System can support multiple tiers of benefit reduction. For an example,

• When employee’s age is 60, benefits are reduced by 10%
• When employee’s age is 65, benefits are reduced by 20%
• When employee’s age is 70, benefits are reduced by 30%

You can set up Benefit Reductions to be based on Original Full Benefit Amount or Already Reduced Benefit Amount .

Original Full Benefit Amount

Example: If Benefit reduction is set as 10% reduction at age 60 and 20% at age 65, and employee’s benefit amount is $100,000 before he turned 60. Then at the age of 60, employee’s benefit will be reduced to 10% of the original full benefit amount which will be $10,000 and his benefit coverage will be $90,000. At the age of 65, an employee's benefit coverage will be reduced to 20% of the original coverage amount (original coverage amount was $100,000), that makes $20,000 reduction will make benefit amount to $80,000.

Already Reduced Benefit Amount

Example: If Benefit reduction is set as 10% reduction at age 60 and another 10% at age 65, and employee’s benefit amount is $100,000 before he turned 60, then at the age of 60, employee’s benefit will be reduced to 10% of the original full benefit amount which will be $10,000 and his benefit coverage will be $90,000. At the age of 65, an employee's benefit coverage will be reduced to another 10% of the Already reduced Benefit Amount (already reduced amount is $90,000), that makes $9,000 (10% of the already reduced amount of $90,000) reduction in already reduced benefit amount to $81,000 of coverage.

Spouse Benefit Amount Reduction: Spouse benefit reductions can be based on either Spouse’s Age or Employee’s Age.

• Example → Based on Spouse’s Age: Spouse’s reduction is based on Spouse’s Age. At age 65 benefit is reduced by 30%. Spouse elected $50k. When Spouse’s age = 65, $50k benefit will be reduced by 30% to $35,000.
• Example → Based on Employee’s Age: Spouse’s reduction is based on Employee’s Age. At age 65 benefit is reduced by 30%. Spouse elected $50k. When employee’s age = 65, the spouse’s $50k benefit will be reduced by 30% to $35,000. This is true even when the spouse is less than 65 years old.

In addition to spouse benefits being reduced at a certain age, in some scenarios the insurance carrier may simply end coverage (terminate enrollment) for spouse at a certain age. To support this, each spouse reduction line includes a drop-down option for either Reduced by or Ended.

NOTE: When calculating spouse reductions, the system uses the same rule selected for subsequent reductions as applied to Original Full Benefit or Already Reduced Benefit (so if Original Full Benefit is selected, then all subsequent employee AND spouse age reductions are applied to Original Full Benefit).

Life and AD&D - Rates

For Employee and Spouse rates -- rates are always calculated per $1,000 of benefit per month.

Rate can be a monthly flat rate per $1000 (regardless of employee/spouse age, gender, tobacco), or rates can be different based on Age, Gender, Tobacco

Life and AD&D rates must be combined.

Enter rate for employee, spouse, and children, if they apply. You have an option to mark Spouse rate same as employee’s rate.

Employee & Spouse Rate

Age Rates: You have an option to set up individual age band (All Ages), 5 year age band or 10 year age bands.

Define at what age should new enrollments be rated drop-down:

• Employee’s Enrollment Effective Date
  
  • Age of employee/spouse on enrollment effective date -- Employee enrolls in coverage effective 07/01/18 and is 35. Charge employee the rate for age 35
• Current Year Policy Start Date
  • Age of employee/spouse on plan’s effective start date -- Plan start date is 01/01/18. Employee enrolls in coverage effective 07/01/18 and is 35, but on 01/01/18 he was 34. Charge employee the rate for age 34

Age band changes become effective on Next Policy Anniversary: Plan effective start date is 01/01/18. Employee has a birthday on 7/5/18 which results in a change of rate based on new age. Continue charging employees the same rate until next year policy anniversary (01/01/19) at OE.

Spouse’s rate can be calculated based on Spouse’s age or Employee’s age.

Child Rate

Child rates are not based on age, tobacco, or gender.

If Child Benefit type = Flat Benefit Amount, Increments > Fixed, or % of Employee Election, then rates must be entered as per $1000

BUT, if Child Benefit Type = Increments > Custom, then we show an additional option to enter child rates per Custom Benefit Amount.

If Child rate is per individual enrolled child then check the checkbox. This means each enrolled child is charged. If children are considered a single unit, do not check this box.

Contributions

Contributions can be set up as the same for all employees or based on employee groups such as locations, Job class, Departments etc.

Contributions are entered for the COMPANY’S contribution amount, not employee’s.

• Employee = contribution towards employee’s cost only
• Spouse = contribution towards spouse’s cost only
• Child = contribution towards child’s cost only

2 options for company’s contribution for Employee

• % of Cost
• Up to Benefit Amount - employer pays cost up to X benefit amount entered, then employee pays the cost for any benefit amount selected above that.
  • Example: Contribution is up to $20k and employee elects $50k. Employer will pay for first $20k benefit, and employee will pay for remaining $30k.

Contribution for Spouse and Child will always be a % of cost.