Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Life Insurance and AnnuitiesHard
A Florida employer provides a contributory group life insurance plan for its employees. Which of the following statements is true regarding employee participation in such a plan?
- A100% of eligible employees must participate.
- BAt least 75% of eligible employees must participate.
- COnly employees who are considered highly compensated are required to participate.
- DParticipation requirements are determined solely by the insurance company.
Show answer & explanationAnswer & explanation
Correct answer: B. At least 75% of eligible employees must participate.
For contributory group life insurance plans, where employees pay a portion of the premium, a minimum percentage of eligible employees (usually 75% in Florida) must elect to participate to prevent adverse selection and ensure the group's actuarial soundness.
Why the other options are wrong
- A. 100% participation is typically required for non-contributory plans.
- C. Group life plans aim for broad participation and cannot discriminate in favor of highly compensated employees.
- D. State regulations, like Florida's, often set these minimum participation rules.
Contributory Group Life Participation
For contributory group life insurance plans, where employees pay part of the premium, a minimum percentage (typically 75%) of eligible employees must participate to prevent adverse selection.
- Employees pay part of premium
- Minimum 75% participation required (FL)
- Prevents adverse selection
- Ensures group's actuarial soundness
Memory trick: Contributory means 'C' for '75%' participation, but Non-Contributory needs 'N' for 'Nearly All' (100%)!