April 15, 2024

Give Notice—Provide Conversion/Portability Documentation to Terminated Workers

When an employee is terminated, there is a critical notice that is often overlooked in the wake of releasing a team member from the organization. Surely, you collected equipment like laptops and files. But what about providing the required group life insurance conversion/portability notice? This is particularly important if your employee has health issues and would be unable to get life insurance coverage on their own.

It’s your fiduciary responsibility to provide a conversion/portability notice informing a terminated worker of a defined window of time (typically 30 days) when he or she can transition from the group life plan to an individual policy. That window of time is defined within your certificate of coverage and summary plan description (SPD).

When employers fail to provide this required conversion/portability notice, a messy and costly tangle of legal liability can occur years later.

No Coverage, No Surprises
Here’s a common scenario, one of many litigious circumstances you might confront if you fail to deliver a group life insurance conversion/portability notice.

Years later, the former employee passes away and the spouse believes a life insurance policy is in place. After all, there was no written documentation that the group life policy the spouse held was no longer active. The beneficiary pursues a claim and finds out the policy has lapsed. There is no coverage in place. The opportunity to convert the group life plan into an individual policy is over. With no benefit, the beneficiary is surprised and pursues legal action.

Simply furnishing a conversion/portability notice to the former employee within the specified window of time would have fulfilled your fiduciary duty. 

You can see how scenarios like this have resulted in drawn-out litigation to determine if an employer will be held responsible for the life claim amount that would have been covered under the life insurance benefit. 
Give Notice—Action Steps
Many times, employers are unaware of the obligation to provide conversion/portability notices to their separated employees. But this action step is required.
Refer to the SPD: Your summary plan description and certificate of coverage defines a window of time when a former employee can convert from group life insurance to an individual plan. Communicate this clearly in the conversion notice so the terminated worker is aware of his or her obligation to meet this deadline if an individual policy is desired.
Establish a Procedure: Review your group life insurance policy to understand your responsibilities and create an internal procedure to ensure you are providing the appropriate notices for conversion.

  • Create an internal termination checklist that includes delivering a group life plan insurance notice.
  • Include language concerning conversion/portability rights.
  • Provide contact information to initiate a policy conversion.
  • Aside from the written notice, consider verbally notifying the terminated employee of his or her rights to convert a plan within a given time period.

Employee benefits is a dynamic area for business that demands attention and expertise. Rely on your team at The Fedeli Group to help you establish critical best practices, including how to meet necessary group life policy conversion/portability requirements. How can we help?

Our mission is to help clients protect assets and enhance employee outcomes through the delivery of exceptional risk management and employee benefit consulting services and products.

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