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Employers Beware: Comply with Plan Terms

A recent court decision boldly underscores the importance of accurate plan administration, specifically as it relates to eligibility.  In Carolina Care Plan, Inc. v. Auddie Brown Auto Sales of Florence, Inc., 2007 U.S.Dist. LEXIS 24962 (D.N.C. 2007)], the HMO sued the employer for over $650,000 worth of claims reimbursed to an individual who was no longer eligible for the plan. 

It is essential that only eligible individuals be allowed to participate in a plan.  An employer should never unilaterally extend eligibility.  If an individual’s eligibility is to be extended, the plan, with the agreement of all relevant parties, such as carriers and reinsurers, must be amended to reflect the new eligibility classification.

 

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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