The Four Biggest Liabilities of your small business employee benefits plan

Benefits Administration is a simple process in the age of the internet. Online portals and designated service staff to solve problems make this part of an owner or HR professionals job that is not particularly time intensive. Therefore, as years go by without any issues, it is possible to take your “eye off the ball” when it comes to proper updates in reporting. This can create a liability concern in the case of a claim.

It is important to remember that plan details are only as accurate as an administrator reports to their provider. Therefore there are a few key items that every administrator needs to stay on top of. Making sure everything is in line in these four areas prevent you from any liability to do with your benefits plan.

Salary Changes

If a plan has a disability benefit, any claim paid will be based on a percentage of the claiming employee’s salary. It is the administrator’s job to report any changes in salary that have happened, to avoid an employee being paid a different amount than they are entitled to. Salary must be reported as T4 income, thus anyone taking income in dividends is not eligible to join for disability purposes. This is quite often the case with the owner of a company.


When an employee leaves the company, the administrator must tell their provider promptly including their name and termination date. Conversely, when a new employee joins the company, they must be enrolled in the plan within 31 days of becoming eligible. If they miss this window and join at a later date, they are considered a late applicant and must provide evidence of insurability in order to join. This is a large administrative headache and is easily avoided by monitoring who is eligible for the plan. New hires can even sign the plan enrollment and future date it if the company has a waiting period to ensure that no one is missed.


In the case of a family plan, eligible dependents are treated much the same as employees. Thus, if any employee on a family plan gets married, or has a child, they must be added to the plan within 31 days of the date of marriage or birth. They are subject to the same “late applicant” status as the employee. This is very common to overlook as administrators won’t necessarily know all that goes on in an employee’s life, thus the onus here is on the employee to report. Communication by the administrator that this is important information that must be shared can help to reduce problems.

Taxable benefits

The CRA needs to get paid, either in the premium or in the claim. For this reason, benefits that claim a large and important payout should always be paid by the employee so that they are collected on a tax-free basis by that same employee (avoid double taxation). This includes the pooled benefits like life insurance and critical illness insurance and most importantly disability. Check with your agent/ provider that if there is an employee contribution on the plan they are covering the cost of these benefits.

Although this is ultimately in the hands of the plan administrator, a diligent service provider or agent can help to alleviate many of these issues. Check with your provider to see that they have regular follow ups scheduled to update these key areas.

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