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LawTalk
LawTalk, Attorney
Category: California Employment Law
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Experience:  I have 30 years of experience in the practice of law, including employment law and discrimination law.
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Troubled company may need to stop paying for health care coverage

Resolved Question:

Troubled company may need to stop paying for health care coverage due to lack of funds
We are currently paid up through 9/30. Company may not be able to pay current month's premia, resulting in termination by carriers. There is no good way to handle this, but is there a playbook? Praying it doesn't come to this, but looking bad now.
Submitted: 6 months ago.
Category: California Employment Law
Expert:  LawTalk replied 6 months ago.

Good morning Jeff,

I'm Doug, and I'm very sorry to hear of your situation. My goal is to provide you with excellent service today.

If you have a shared expense health policy where you take money from your employees the first of the month to pay for that month's premium, then you may cancel the policy but you MUST pay this month’s premium so that the employees get what they paid for.

You will need to give notice to all affected employees that effective November 1, there will be no health coverage, and that because you are cancelling the policy they will not be eligible for COBRA either. You may find that some employees leave because of this, but that is their right as it is your right to terminate a benefit. You simply must not terminate anything retroactively. It must be terminated effective on a date which is either immediate upon notice to the employee or on a future date.

I understand that you may be disappointed by the Answer you received, as it was not particularly favorable to your situation. Had I been able to provide an Answer which might have given you a successful legal outcome, it would have been my pleasure to do so.

If you have additional questions, you may of course reply back to me and I will be happy to continue to assist you further until your questions have been answered to your satisfaction.

Kindly take a moment to rate my service to you based on the understanding of the law I provided. Please understand that I have no control over the how the law impacts your particular situation.

Thank you,

Doug

Customer: replied 6 months ago.

Doug, this is helpful, and needs more clarity. When the employees indeed pay in advance, I understand "must."


1) if there are NOT funds available, then what?


2) inclination is to delay notice as there is a reasonable chance we can make the payment. Is there any legal difference notifying say, today, vs. 10/30? From a human level, more notice is good, but change in message would be terrible.

Expert:  LawTalk replied 6 months ago.

Hi Jeff,

You asked:

1) if there are NOT funds available, then what? You need to find the funds. Failure to pay the premium after you take money from your employees, or trying to cancel the health benefit---which is part of the compensation for your employees-- retroactively will subject you to a separate claim and lawsuit from every employee affected.

2) inclination is to delay notice as there is a reasonable chance we can make the payment. Is there any legal difference notifying say, today, vs. 10/30? From a human level, more notice is good, but change in message would be terrible. Whether you delay or not is up to you. Keep in mind that you will be leaving every employee/family with no coverage whatsoever when you terminate the policy. That can cause a tremendous financial hardship on any of them that has a serious medical emergency the day after the policy lapses. The more advanced notice they have that they need to get a new policy, the better it is for them, and the less likley it is that you will have disgruntled employees.

Doug

Customer: replied 6 months ago.

Doug, I'm guessing the same holds for 401k payments where the company has historically "lumped" a few months together, then paid the 401k company. I'm just the messenger, trying to clean this up!

Expert:  LawTalk replied 6 months ago.
Yes, the same holds true for the 401K plan, Jeff.

Doug
LawTalk, Attorney
Satisfied Customers: 27237
Experience: I have 30 years of experience in the practice of law, including employment law and discrimination law.
LawTalk and 3 other California Employment Law Specialists are ready to help you
Customer: replied 6 months ago.

Doug, I truly appreciate your wisdom in this funky situation. 100% owner went through a nasty divorce and has been absent months at a time with drug, alcohol & depression issues. I'm not a signer on anything and am paid on a contract to my C Corp to provide "CFO Services". I've never signed anything as CFO; they call me VP FInance. Do I have any liability?

Expert:  LawTalk replied 6 months ago.

Hi Jeff,

As you may not be aware, the Rules of JustAnswer specify that each customer ask one question in each question thread. For new questions, the customer is asked to open a new question thread.

This is the third separate question in this thread---the first two being the health insurance issue and then the 401K issue. As this question brings up an entirely new set of laws and issues, I must ask that you open a new question for this personal issue of yours. You may ask for me personally by referring to me by name (Doug) in your new question and I will be able to assist you. Thank you for your understanding.

Doug

Customer: replied 6 months ago.

Doug, was NOT aware. Thank you for the clarification. When I have a related string of questions, I need the Expert to help with boundaries.

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