Rebates of benefit plan insurance premiums come with unique treatment

In the commercial and individual settings, many insurance providers are providing discounts on premiums and even returning portions of previously-paid premiums in light of the COVID-19 pandemic. One example is modest checks issued by large agencies, returning portions of automobile insurance premiums, in recognition that far fewer miles are being driven by most of the insured.

In most cases, this presents no complications on the bookkeeping or administrative front, even for commercial coverage: If deductible premiums are returned, it constitutes taxable income or a reduction in premium expense. However, if the coverage relates to a benefit plan, there may be more to consider. Guidance may not cover COVID-19 specifically, but the return of a premium that benefited plan participants in most cases will need to be administered in a manner that also benefits those participants. Any entity receiving refunds of such premiums should become familiar with the rules, and consider discussing with your plan’s third party administrator or other well-versed professionals.