Recouping underpayment for health premiums from employees

Due to a comedy of errors, our firm has two employees for whom their share of health insurance premiums has not been deducted for almost 2 years. Both of these employees changed their coverage about 2 years ago, but those changes just did not make it to our payroll software. We feel terrible that this happened. Of course, our employees feel pretty terrible, too, and even have indicated their feeling that since this was our mistake, we should swallow the expense. Is there any law that prevents us from recovering these unpaid premiums from our employees? Since the amounts are substantial, we have offered to recover the expenses over 12 months. We have asked our employees several times (and this recommendation is in our employee manual) to check their payroll advice notices each payday. So, we feel the employees should have noticed this mistake long before we discovered it.

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  • [font size="1" color="#FF0000"]LAST EDITED ON 09-24-02 AT 02:01PM (CST)[/font][p]I would tell the employee that if they don't want to make up the premiums, no problem. I'll just go back to the carrier and let them know that this employee was not supposed to have coverage for the last 2 years. Then the carrier can go back to the providers and ask for refunds; then the providers can go back to the employees and let them know that they now owe the costs of those services, without insurance discounts, and probably with interest. Not to mention they will now lack protection under HIPAA and will have waiting periods for pre-existing conditions. (The employee might decide that what he would owe to providers would be less than what he would make up and go for it.)

    Of course, you might want to make a quick call to your carrier first. They might be unwilling to go back more than 1 year, but that has not been my experience.

    Also, you have to make sure that your correcting deductions do not bring the pay so low as to break any other laws.

    The employee just needs to be reminded that they can't have what they didn't pay for. It is totally implausable to me that they didn't notice the lack of deduction on their paychecks, so they are just as reponsible, if not more, as the employer for this error.

    And that's the truth! x:P
  • I can appreciate this was difficult but the company also made the mistake. And when it comes to payroll, pretty much any employee is going to look at it that it was the company's responsibility, not theirs. I don't think there's any law about recovering the money--did they use the insurance during that period? If so, that's a tough one You're talking about 2 years of premiums and I'm sure that's pretty expensive. I have several suggestions: 1) You chalk it up--eat the cost and make it right immediately 2) You take out a little more from their insurance deduction each week or whatever your payroll is until it's made up--just notify them that's what you're going to do and do it--give them a total amount and break it down to what their cost will be
    3) Ask them to write you a check monthly
    But consider the morale issue of this--all the remaining employees (their friends) will now know about whatever you do so, good or bad, you're on trial. My advice would be to let it go...

    Due to a comedy of errors, our firm has two employees for whom their share of health insurance premiums has not been deducted for almost 2 years. Both of these employees changed their coverage about 2 years ago, but those changes just did not make it to our payroll software. We feel terrible that this happened. Of course, our employees feel pretty terrible, too, and even have indicated their feeling that since this was our mistake, we should swallow the expense. Is there any law that prevents us from recovering these unpaid premiums from our employees? Since the amounts are substantial, we have offered to recover the expenses over 12 months. We have asked our employees
    several times (and this recommendation is in our employee manual) to check their payroll advice notices each payday. So, we feel the employees should have noticed this mistake long before we discovered it.



  • Legally, you probably have the right to recoup this. Just as if you had made a mistake and gave them too much money in their paycheck and they spent it - you would have the right to recoup this money.

    When I worked in banking, we occasionally had "mistakes" where money was put in the wrong account - people spent it and thought "Well, since you guys put it in my account, I spent it!" I'll never forget one 28 year old airman had social security checks going erroneously into his checking account. He was having himself a "high old time" every weekend on some retired colonel's social security check. He spent over $10,000 before the "colonel" realized his account was not as "flush" as he thought it should be. This boy thought we were crazy wanting him to pay back the money. The bottom line is legally he had to pay it back.

    In your case, which is not nearly as blatant, the same applies. It really depends upon how you and your company feel about it - is it worth alienating two employees and causing hard feelings or...can you just change it now and go on from here?

    It's really your call and your right to recroup it if you feel you must.
  • cwilliams, It appears from your words that the two employees dropped their coverage approximately two years ago. You have now discovered that your company has collected two years of premiums while they had selected not to be covered. Then "is is a slam dunk" to me! You must consider that their premium collections were most likely "pre-tax calculations" and uncle sam is owed his money both state and federal, also. You are luck that there were not hospital charges applied during the two year period. You must, however, research to see if the employee did have other coverage and had charges that were not paid because he/she thought they did not have medical coverage, and now realize that they did have coverage but did not make claim. Now, you are in a catch 22 situation. Help the employee make claim for the medical coverage, if there are any and then proceed from there. It should be very clean if there were no claims cost to the employee. He/she was covered whether they wanted or not if premiums were paid. Given there were no claims, then suck up the company mistake and pay the employee. Been there and done that with a company with over 3000 participants and self funded. if not self insured, your insurance company may give you a hassel, but then they most likely want your business and should be interested in a pay back, but they don't have to cooperate. Your company owes the employee for wrongful collection and I believe the wage and hour folks would most likely agree with the employee, if they are involved there could also be a penality or interest. Consider that when making your calculations. Check with your retained attorney to determine if you should obtain any kind of signed document for the release of liability or claim to any other damages by the employee. In our situation for family coverage we are talking a $4000.00 dollar debt to the employee to make acorrection of wrongful collection for family coverage for one employee and $8,000.00 for two employees. This is going to impact on two years of "CPA year-end closeouts" with our CPA firm. Then you need to check your system of "checks and balances" to prevent this from happening again. Good luck, Pork
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