Employee benefits liability (EBL) is insurance that covers businesses from errors and omissions that occur when employee benefit plans are administered. These errors and omissions may include failing to enroll, maintain or terminate employees in a plan, and failing to correctly describe benefit plans and eligibility rules to employees.
EBL insurance covers a wide range of plans, including health, dental and life insurance, profit-sharing plans, workers’ compensation and employee stock plans. EBL insurance is typically sold as a standalone policy.
EBL Insurance Scenarios
One example of how EBL insurance could protect your company from financial losses is in the instance of an HR manager accidentally failing to enroll a new employee in the company-sponsored health plan. The employee later gets into a car accident and is shocked to find out at the hospital that he or she does not have health insurance. EBL insurance could limit your business’s exposure because the failure to enroll was due to an error or omission in administering a health plan.
In addition, EBL insurance could protect employers from some ACA-related claims. For instance, consider a situation in which independent contractors at your company bring forth a lawsuit arguing they have been wrongfully misclassified as independent contractors. They argue that they should instead be considered full-time employees, and, therefore, eligible for health insurance under the Affordable Care Act (ACA). An EBL insurance policy could shield your business in such a case, assuming the misclassification was not done intentionally.