in Advisory Opinion 2015-02A, has determined that a stop-loss
insurance policy purchased by an employer for its self-insured health
plan is not a plan asset, even though part of the plan's costs are
paid through employee contributions.
Background. Under a stop-loss insurance policy, the employer
remains responsible for paying plan benefits, and the insurance
reimburses the employer for claim payments above certain stated
thresholds (i.e., attachment points). Employers with
self-insured health plans frequently purchase stop-loss insurance to
guard against the risk of large, catastrophic benefit claims.
had previously ruled in Advisory Opinion 1992-02A that a stop-loss
insurance policy purchased by an employer for its noncontributory (i.e.,
no employee contributions required) self-insured health plan was not
a plan asset. DOL made this determination based on the
insurance proceeds were only payable to the employer
who was the named insured under the policy;
- The employer
had all rights of ownership under the policy, and the policy was
subject to the claims of the employer's creditors;
- Neither the
plan nor any participant or beneficiary had a preferential claim
against the policy or beneficial interest in the policy;
- The policy
was not used to provide plan benefits or as security for
payments of benefits; and
benefits were not limited or governed by the amount of insurance
proceeds received by the employer.
DOL has now said that a stop-loss policy purchased by an employer for
its self-insured contributory health plan (i.e., employee
contributions required) was not a plan asset, despite the fact that
part of the plan's costs would be paid with mandatory employee
1. The stop-loss policy satisfies the criteria
identified in Advisory Opinion 1992-02A, except for the
required employee contributions.
2. The employer uses an accounting system for the
plan that prevented employee contributions from being used to pay
stop-loss policy premiums.
3. The arrangement requires the plan, not the
stop-loss insurer, to pay participants' benefit claims.
4. The stop-loss policy provides for the employer to
be reimbursed only if it paid participants' benefit claims from its
general assets so that the employer never received reimbursement from
the insurer for claim amounts paid with participant contributions.
Takeaway for Employers. It is not clear from Advisory Opinion
2015-02A whether DOL requires all of the factors outlined above to be
present for a stop-loss policy to avoid plan-asset status.
Therefore, employers that sponsor self-insured contributory health
plans should consult with qualified employee benefit professionals to
determine whether its stop-loss insurance arrangement is a plan