CFO ISSUES WARNING ABOUT SINGLE-EMPLOYER TRUSTS
Florida’s Chief Financial Officer Tom Gallagher is alerting employers to use caution when considering setting up a health benefit plan through a Single Employer Trust (SET) document that requires sending financial contributions to an out-of-state bank account. Florida consumers have been victimized by such plans, including the Meridian Benefit Plan that is now in federal bankruptcy in New Jersey.
Out-of-state plans and bank accounts can leave employers vulnerable to fraud, and can leave state regulators with very few options for helping with recovery. In the case of Meridian Benefit, marketers also claimed to have re-insurance or stop loss coverage when they did not.
single-employer trust may appear to offer substantial benefits and savings, but
they are complex arrangements that can be rife with financial risk,” said
Gallagher, who oversees the Department of Financial Services. “With any
insurance or financial transaction, it is imperative to verify before you buy.
Remember, if it sounds too good to be true, it probably is.”
An employer approached to buy this type of plan will be told it is an Employee Retirement Income Security Act (ERISA) qualified plan regulated by the U.S. Department of Labor. To implement the trust, the employer is asked to sign a standardized document, then is billed monthly for a financial contribution deposited in an out-of-state custodial bank account. The monthly premiums, or contributions, are paid into a custodial bank account that is supposed to pay medical claims and buy reinsurance or stop-loss insurance to cover costs in excess of the account balance.
Although there may be an accounting of each employer’s contributions, there is a
risk that funds that are supposed to be in separate custodial accounts are being
For more information or to find out if an insurance company or agent is authorized to transact in Florida, log on to www.MyFloridaCFO.com or call the Department of Financial Services Consumer Helpline at 1-800-342-2762.