Level-Funded Plan Surpluses

For employers who offered a level-funded plan during 2024, the employer may receive a surplus payment from the carrier. The safest approach is to handle such payments similarly to an MLR rebate, returning a percentage of the payment to current plan participants in accordance with the percentage of the premiums that were contributed by plan participants. For example, if plan participants contributed 40% of the plan’s annual premium payments (the employer contributed 60%), 40% of the payment should be distributed amongst current plan participants within 90 days of receipt, generally as a premium holiday or as taxable cash. However, if the level-funded plan document specifically states that any surplus funds belong exclusively to the employer, then the employer can follow the terms of the plan and would be able to keep the entire payment and use it toward any business expenses.

^{While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.}

Author