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“Federal officials are checking whether $60 million in rebates paid last year by Medica have trickled down to the health plan's 1 million members. The Department of Labor recently asked Medica to turn over the names of the 10,000 employers who were given the rebates in the form of a 50 percent reduction in December's premium or fee charge.”(1)

Recently, the Department of Labor investigated the “Payment Holiday” that Medica offered last December. This was a well publicized endeavor that offered their employers a month in which only 1/2 of their medical premium payment needed to be paid. On the surface, this gesture was well intended by Medica, and well received by their participating employers.

In the process of announcing this unusual benefit, there was not much mentioned about employee contributions and how each employer should handle that aspect of the payment holiday. The Department of Labor however felt it was important to find out just what did happen to those employee dollars. Were they still collected by the employers as usual even though the employer’s costs had been reduced? As many of you are aware the Employee Income Security Act of 1973 outlines rules for both employee retirement and welfare plans. In this Act, which the Department of Labor is responsible to enforce, there are strict rules about handling employee contributions, especially in welfare plans or self funded medical plans. Even though the outcome of this investigation is not yet known, it is clear that we as employers need to always handle very carefully any amounts deducted from employees paychecks for any reason. The employer basically becomes the guardian of any such funds and is ultimately responsible to assure that they are used as intended by the employee. Thus in this particular event, each employer should have reduced any employee contributions by 50% for the month of December. In the future, if you just aren’t sure about something like this, ask us, your insurance agent, or contact the governmental agency responsible to enforce such rules.

(1) Article entitled “Did Members Enjoy Medica Holiday?" Minneapolis Star & Tribune 823-2004.

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