We got this “MLR” (Medical Loss Ratio) payment check a few weeks ago – what should we do with it??

Before somebody decides to tell me  how many nuances I missed please understand this is an overview of the subject. I intend to hit the highlights.


Employers with HR professionals will already be on top of this (yes, you need one of those). For the other employers trying to do HR compliance at home on the weekend , you might consider looking at this and then calling your broker or payroll company!


If you are an employer who offers an employee benefit medical plan then you may be getting money back from your medical carrier under the MLR (Medical Loss Ratio) legislation.


Here are some steps you need to take if you are the employer.


1. Call your insurance broker and get advice on how to proceed. If you are not sure they have a clue about this you need to look for a broker that does – right now!


2. You need to remember that any money “you” spent is employer money and any money “you collected” from employees was, and is, their money, not yours. That is important because it forms the basis for looking at what you need to distribute from your MLR check.


3. Look at your SPD and other plan documents and see if the money paid for benefits was considered to be “Plan Assets”. (Right now you should be asking yourself if you know what an SPD is, if it has been updated, and if all your plan documents have been checked for cross document agreement.)


4. Look at how much you got back as an MLR rebate and decide if it will cost you more to locate past year plan participants than you will be giving them, and if returning premium will cause employees a tax consequence. If that is the case then you should consider just giving the money back to current plan participants. How do I do that you might ask!


a. Distribute the MLR rebate back to employees based on the percentage of premium they pay to participate.


b. Provide a plan benefit for all participating employees paid for with the MLR rebate money. “..the employer may utilize the rebate for other permissible plan purposes, such as applying the rebate toward future participant premium payments or toward benefit enhancements.”


5. What was that tax consequence I mentioned in #4? If you utilize section 125 (Pre Tax) for employee payments then they will have to declare the rebate as income if you return it. Adding a benefit enhancement for current plan participants might be a better way to go.


And now for the really good news – “Plan fiduciaries should apply MLR rebates that are plan assets within three months of the date the MLR check is received from the insurer.” So if you have had that money for a little over two months you need to make some decisions and take action.


If this brought up more questions than answers please feel free to contact us, 602-381-9900.

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