Got an insurer rebate? ERISA wants the employee share used by Dec. 30

Who owns the rebate money?

ERISA treats a slice of most MLR rebates as plan assets, not company income, and the dividing line is who paid the premiums. Where employees contributed, the matching share must be used only for the benefit of plan participants and beneficiaries. Employers that paid 100 percent of premiums can keep the entire rebate. Where employees paid 100 percent, the whole rebate is a plan asset.

The split is proportional. If employees paid 30 percent of premiums in the MLR reporting year, 30 percent of the rebate is a plan asset. That share is measured against premium contributions for the year the rebate covers, not the current plan year.

The three-month window exists because plan assets generally have to be held in trust. The Department of Labor’s Technical Release 2011-04 on MLR rebates and plan assets relieves plans of that trust requirement when the money is used promptly. The release also cites de minimis amounts as a reason to use a route other than cash, but it does not define the term. The plan fiduciary has to decide what counts as de minimis and write down why.

What can employers do with the participant share?

Three routes satisfy ERISA’s exclusive-benefit standard. The plan-asset portion can go to participants through a reasonable, fair and objective allocation method, be applied as a premium reduction in the next plan year, or fund benefit enhancements. Employers with more than one benefit option must also keep each option’s share separate, because a rebate attributable to one option cannot be used to benefit enrollees in another.

Cash checks are the least popular route. Jay Kirschbaum, senior vice president and director of benefits compliance at World Insurance Associates, said in the firm’s 2026 year-end compliance roundup that giving employees a pro rata share is always permitted but “typically very burdensome,” which is why employers look for alternatives. He advised keeping the plan-asset analysis, the allocation method and proof of how the money was used.