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  • Benefits Premium Deductions California

    We are paid every 2 weeks at my company. I became eligible for company sponsored benefits on 9/1. My company made a deduction on 9/3 pay date, but since we are paid after a one week float, the period worked was actually 8/16-8/29.

    I argued that the first deduction should have been made on 9/17, since the prior work period was entirely in August. The benefits team mentioned that deductions are based on pay date, and that the 9/3 deduction was not a mistake. Premiums are taken every pay date when an employee has coverage.

    In certain scenarios, it seems that this policy leads the employee to pay more than his/her share of coverage. For instance, hypothetically if I quit at the end of this month on 10/29, I will have contributed for 10 weeks of benefits (5 pay dates: 9/3, 9/17, 10/1, 10/15, 10/29) but only received less than 9 weeks of coverage (Sept and Oct).

    Does anyone know if the company is allowed by law to collect premiums based on pay date rather than pay periods? In my case I feel I am making an extra premium payment. Thank you.

  • #2
    Yes, they are. It depends on when the premiums are due to the insurance company. Some are paid current, some in arrears, some in advance of the coverage period. The law does not address this situation.

    If you are paid biweekly, though, it's likely that your per-paycheck deduction is 1/26 of the annual contribution. So, in the 10 months that have 2 paychecks, the company is actually floating part of your contributions. In the two months that have 3 paychecks, they make it up.

    Plus, you don't know if they would even make a deduction from your final paycheck in the scenario described. Coverage is not by pay period; it's by month, except perhaps for the first and the last periods of coverage.
    Last edited by Pattymd; 10-06-2010, 04:38 PM.
    I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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    • #3
      The law does not address this issue.
      The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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      • #4
        Thank you, regarding last paycheck I was advised by the benefits team that they would make the deduction as long as the pay date fell in a month that I received benefits.

        I know there are other scenarios that my coverage would be longer than what I paid into the plan (especially if employees quit early in the month, but are covered for the full month), but wanted to point out that it was possible that I would end up paying more than my actual benefit received in certain scenarios.

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        • #5
          It is also possible that you would end up ultimately paying less than the benefits received. The law simply does not mandate to the employer how they are to manage benefit deductions.
          The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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          • #6
            Agreed with the other answers. Past that, pay periods often do not have much to do with this. Let's say that Bob pays $500/month for his life insurance and Bob terminates Oct 1st. If the coverage last the entire month, then Bob should be paying for the entire month even though he only worked the one day. But maybe Bob is paid SM, maybe WK or BW. I worked for one employer who paid factory workers WK, the big brass monthly, and everyone else SM. Keeping the medical plan deductions in balance was beyond interesting. Having sat on the payroll side of things, my "instructions" were not to get a fixed number of pay periods, but rather to figure out when the coverage ends, and make sure that the total deductions paid by the Bobs exactly equalled what they were supposed to pay for that coverage.

            Now not all employers end coverage at month end. Every employer I have ever worked for followed that rule, but some employers (I hear maybe half) cut coverage basically at termination date. So the proper deductions always involves figuring out when the coverage ends, and what all other deductions up until that point have paid for. The difference is basically the deduction amount.

            One last point. CA is seriously hardball on deductions, especially for terminated employees. Even medical deductions. IF you are indeed paying more then you authorized, file a wage claim. However CA will listen to the "if you received $500 in medical coverage for the month, your employer gets to deduct that amount, even if you terminate early in the month" argument. I work for CA employers, we have indeed had employees file wage claims on this issue, and they did indeed lose. But if alternatively the employer is taking more money then you authorized, file a wage claim. It might work. CA rules are not the same as everyone else's. CA has a rather interesting rule on "self help remedies" which could indeed impact medical plan deductions.
            "Reality is that which, when you stop believing in it, doesn't go away".
            Philip K. **** (1928-1982)

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            • #7
              Originally posted by barueba View Post
              We are paid every 2 weeks at my company. I became eligible for company sponsored benefits on 9/1. My company made a deduction on 9/3 pay date, but since we are paid after a one week float, the period worked was actually 8/16-8/29.

              I argued that the first deduction should have been made on 9/17, since the prior work period was entirely in August. The benefits team mentioned that deductions are based on pay date, and that the 9/3 deduction was not a mistake. Premiums are taken every pay date when an employee has coverage.

              In certain scenarios, it seems that this policy leads the employee to pay more than his/her share of coverage. For instance, hypothetically if I quit at the end of this month on 10/29, I will have contributed for 10 weeks of benefits (5 pay dates: 9/3, 9/17, 10/1, 10/15, 10/29) but only received less than 9 weeks of coverage (Sept and Oct).

              Does anyone know if the company is allowed by law to collect premiums based on pay date rather than pay periods? In my case I feel I am making an extra premium payment. Thank you.
              Have you asked the Benefits Dept what happens in a 3 paycheck month? My company deducts only from the first 2 paychecks in any month. If your company does the same then your argument would not be true.

              You need to separate, in your mind, pay period ending from pay date. Benefits are figured on pay dates. Your company has already paid the premiums for the month (usually due 1st of month) and now the company is recouping the premiums from the employees on each pay date.

              If an employee quits early in the month I deduct the entire month's premiums from the final check since the insurance continues to the end of the month. My last company, the insurance stopped on the termination date so it was a judgement call as to whether more premiums were due.

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              • #8
                HRinMA, I worked for one company who deducted half the employee contributions on each biweekly paycheck of a 2-paycheck month, and on the first 2, but not the third, paycheck in a 3-paycheck month. Makes it a WHOLE lot easier to explain to the employees, as well as making for a much cleaner reconciliation of the accounting. Our employees liked it that way because, even though the deductions, when made, were a bit larger than they otherwise would have been, they loved the 2 "deduction-free" paychecks per year.

                OP, you're going to have to reconcile this internally; as previously stated, as long as the deductions are what you authorized, the law is silent on this matter.
                I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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                • #9
                  Originally posted by Pattymd View Post
                  HRinMA, I worked for one company who deducted half the employee contributions on each biweekly paycheck of a 2-paycheck month, and on the first 2, but not the third, paycheck in a 3-paycheck month. Makes it a WHOLE lot easier to explain to the employees, as well as making for a much cleaner reconciliation of the accounting. Our employees liked it that way because, even though the deductions, when made, were a bit larger than they otherwise would have been, they loved the 2 "deduction-free" paychecks per year.

                  OP, you're going to have to reconcile this internally; as previously stated, as long as the deductions are what you authorized, the law is silent on this matter.
                  It does make it much easier and cleaner for me. In addition cancelling only on the first of the month is a plus. We have high turnover and it would be a headache to cancel mid-month.

                  Every 3 paycheck month I have to send out a reminder email to managers because I always gets call asking why it wasn't deducted.

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