Benefits specialist Jonathan Corrigan believes advisors need to spend greater time explaining plans to their clients
Faced with increased regulation and the threat of litigation, advisors need to ensure their clients are aware of the intricacies of their benefits plan. That’s the view of Jonathan Corrigan, employee benefits specialist with BC-based Corrigan Financial Group. In his experience, plan sponsors often lack knowledge about their benefits package, which can have dire consequences in the long run.
Citing some examples, he explains what could go wrong when advisor and client are not properly aligned.
“Your client calls you to say they’ve had an employee become disabled and it’ll be years before they return to work, if ever,” he says. “They explain that they haven’t updated wages for long-term disability with the carrier for years – that employee should be eligible for $4,000 of benefit, but will only get about half of that.”
Life insurance is another area loaded with potential pitfalls. Plans tend to be complex, so it’s imperative that advisors go through the details thoroughly with the plan sponsors, explains Corrigan.
“A client says an employee recently died and now his wife wants the $50,000 life insurance benefit from the plan,” he says. “The problem is that the employee signed a waiver for benefits when he started years ago and never told his wife about it. He wanted to save some money.”
He continues: “You remind the client that when you set the plan up originally it was a mandatory plan, to which he responds ‘what’s a mandatory plan?’ That same client is also below the minimum participation level for his insurance provider, and has no idea of the downside to a non-mandatory plan.”
To avoid difficult situations like those described above, Corrigan is a big advocate of making checklists, similar to those used by a doctor or pilot. That minimizes the potential for error substantially, and has become something of an article of faith for him.
“We educate clients and give information on common pitfalls in benefits, often after the mistake has been made,” he says. “Business owners and plan administrators understand their business, not benefits. They will absolutely not remember that you set up a mandatory plan seven years ago when they’ve grown from eight staff to 50.”
Common oversights in the group benefits space include the need to explain mandatory benefits in an offer of employment, as well as informing employees that are leaving the company about their right to convert life insurance and benefits to a personal plan within 31 days.
Corrigan therefore advises brokers to make it common practise to create a checklist, covering taxation, liability, administration, privacy, communication, and HR considerations, then go through it at least once a year with clients.
“Do it during your annual or quarterly review, make it a ritual,” he says. “As creatures of habit we are comforted by the familiar. You might feel like a broken record going through the same topics every year, but to your audience it’s all new. Eventually clients will even become familiar and remember some of it.”
