March is here, and it's the perfect time to ensure that your employees are seamlessly enrolled in the CADA 360 Employee Benefits Plan. Conducting regular audits against your payroll system not only reinforces good benefit practices but also guarantees that your team is covered in case of accidents, injuries, or illnesses.
THE WHEN AND WHO OF AUDITS
Ideally, we recommend monthly audits, but we understand that practicality plays a role. Therefore, consider scheduling a comprehensive audit at least once a year to keep things in check.
Determining eligibility is crucial. Each dealership may have its own definition, so refer to your administration guide or reach out to your benefit advisor for clarity. Utilize a payroll extract to cross-verify enrolment against the CADA 360 program.
TACKLING THE AUDIT: WHAT AND HOW
Inaccurate earnings reporting is a common issue. Ensure salary information is regularly updated, auditing all salaries annually and during renewal on March 1st. The complexity arises with varied compensation structures, but keeping data current mitigates errors.
Understanding the nuances of different compensations is vital:
- Salary - For an employee who earns salary, or salary plus bonus, report the current salary as of March 1.
- Hourly Rate - For hourly-paid employees, report the actual hourly rate, on the first day of the last policy month. Your plan outline will specify how many hours a week your employees work, and the Canada Life system will calculate the annual income accordingly. Overtime is not included.
- Piece-rate - Employees paid on a piece-rate basis are paid for the work done and not the time it takes. Earnings mean the amount that employees earned during the year. Report any change in the earnings averaged over one year as per March 1.
- Commissions - If an employee’s earnings include commissions, use average earnings over the past two years, according to that employee’s T4 slips. If that employee has been employed for less than 2 years, estimate their earnings. Any change to the employee’s benefits resulting from a change in commission income will take effect on March 1.
Annual updates to Canada Life by March 1 can help align benefit amounts with earning updates and ensure your employees are eligible when claims arise.
DON'T OVERLOOK BENEFITS
Health and Dental benefits can be waived if employees have alternative group insurance through spouses. Regularly review these waivers and ensure proper coverage, especially if spousal benefits change due to job shifts.
If their spouse loses their benefit coverage due to a change in job, your employee can remove their waiver status if they notify their employer within 31 days of the life event.
Dependent Life benefits and health and dental waivers should also be included in your audit for comprehensive coverage verification.
KEEPING UP WITH DEPENDENTS
Life events, such as marriage, divorce, or the addition of a child, are critical points in your audit. Act promptly to add eligible dependents to avoid late applications requiring health assessments.
THE WHY: REAL-LIFE SCENARIOS
Failure to enroll eligible employees can have severe consequences. Here are some real-life scenarios that underline the importance of meticulous benefit administration:
Scenario 1:
A young employee had not signed up for coverage even though he had been working at the dealership in a full-time capacity for over two years and had a young child. One weekend, he and another colleague, who was enrolled with full coverage, were out and ran into a moose head-on; both were killed instantly.
The family of the employee with full coverage received a life insurance cheque within weeks. The family of the other employee got nothing, so they turned to the dealer for compensation. The dealership administrator didn’t have any documentation signed by the employee to prove that he had been offered coverage and refused it.
In this instance, no coverage was in place, no premium was ever paid, so there was no benefit. As there was no documentation proving coverage had been offered but declined, the family could have pursued legal action against the dealership.
Scenario 2:
A young employee got married and did not think about adding his new wife to his benefits plan. When he started working, he was not married, so he signed up for single coverage. He married during his second year at the dealership but did not check with the administrator about whether he should change his coverage to family.
Conversely, the administrator was aware the employee got married but didn’t reach out to the employee to advise him of the timing of adding new dependents. Several years later, his wife contracted a serious illness requiring biologic drugs that cost tens of thousands per year. His wife was not employed and was staying at home with the couple’s new baby when she was diagnosed. The employee could not afford the drugs and lived in a province where there was no government coverage to assist. At this point, the employee went to the plan administrator to have coverage added for his wife and child but discovered it was too late.
Scenario 3:
A 59-year-old family man suffered a serious heart attack and faced the possibility of not ever being physically able to return to work. Upon review of his Long-Term Disability claim, the Disability Claims Case Manager discovered that his T4 indicated that he had an income of over $54,000, which would make him eligible for the plan’s maximum disability benefit of $2000 per month.
The salary information provided by the dealership reported this employee’s income as $13,000 per year. Accordingly, premiums had been paid based on $13,000, so his insured disability benefit at 67% of salary was only $726 per month. This meant that his benefit was under insured by $1274 a month! With coverage to age 65 that is a loss of over $90,000.
Also, his life insurance coverage was based on two times annual salary, meaning that his Life Insurance protection is only $26,000 when it should have been $108,000. This is another complicated aspect of this situation.
Not reporting the correct income creates a serious liability and legal problem for the dealership and a terrible financial hardship for the disabled employee. While waiting for the legalities of this liability to be resolved, this employee’s income had significantly dropped, creating additional stress for him at a time when he needed to be focused on returning to good health.
Ensuring accurate benefit administration is not just a legal necessity; it's a commitment to the well-being of your team. Regular audits safeguard your dealership from financial risks while providing peace of mind for employees and their families.
If you have any questions or need additional information, please reach out to your dedicated Canada Life group client service representative.