Part of open enrollment planning is determining whether or not you will have an active or passive enrollment.
But, what is an active enrollment and what is a passive enrollment?
Active Enrollment
An active enrollment means that you need to enroll in your employee benefits during annual open enrollment or you will not have benefits during the upcoming plan year.
An active enrollment makes sense when you are making insurance carrier or plan design changes. Asking each employee to complete their enrollment will bring them up to speed on these changes.
Passive Enrollment
A passive enrollment means that if you do not take any action during open enrollment, your current benefit elections will carry over. Each benefit will passively enroll and remain the same as the current plan year.
A passive enrollment makes sense if nothing will change for the next plan year.
It’s also a lot less work to just let everything roll over rather than ask every one to complete their enrollment.
Each Benefit Can Be Either Active or Passive
Generally, if you have an active enrollment, all current enrollment elections will end at the end of the plan year if you do not go through open enrollment.
However, whether each individual benefit is active or passive is technically set at the plan level. Some benefits can be active enrollments while others passively enroll and carry over.
For example, you can make medical, dental and vision benefits active while making all other benefits passive.
If an employee does not complete their enrollment, they won’t have their medical, dental or vision plans for the upcoming plan year. But, they will still have all of the other benefits roll over and continue.
Why would you do this?
When most employees think of open enrollment, their mind goes straight to the medical, dental and vision plans and they often won’t realize that their other benefits won’t roll over unchanged.
Then, they may decide they do not need medical this year, then assume they don’t need to take action, and they don’t complete their enrollment. But they still may want the voluntary life, accident and critical illness plans they enrolled in.
Months later, the employee realizes they no longer have these benefits and they get upset about it.
To avoid this issue, this is when it makes sense to let some benefits passively roll over while making others end within the same enrollment.
Health Spending Accounts Should Be Active Every Enrollment
Health spending accounts should be an active enrollment decision every open enrollment.
While you could decide to have HSA elections passively roll over, you wouldn’t want to do that for FSA elections. This is because FSA elections cannot be changed during the plan year.
Since an employee might forget they had enrolled in the FSA, if you let it passively enroll, an employee may get locked into the same amount as the previous year when they might not want it.
Making the FSA active means it will end unless the employee takes action and elects it again for the upcoming plan year.
FSA elections should be an active enrollment each and every year even if all the other employee benefits are set to passively enroll.
This will ensure that employees don’t get locked into a pre-tax election they aren’t able to change for the entire year.
Advertise an Active Enrollment with Passive Enrollment Unpublished
If you decide to have an active enrollment, it’s typically a good idea to let all of the benefits still passively roll over.
It’s been my experience that employees do not pay attention. Even though you send them message after message and tell them if they do not complete their enrollment they won’t have benefits, you will still have some employees who do not do what they need to do.
Let’s say that an employee is currently enrolled in the medical plan and they do not take action during an active enrollment. In January, they go to the doctor or pharmacy and immediately notice they do not have health insurance.
This employee will immediately contact HR and the most likely outcome is that you will want to correct their enrollment and get them back into the plan.
However, it’s a lot easier make an enrollment correction post enrollment to remove coverage than it is to make a correction to add coverage post enrollment.
It’s because of this that it makes sense that if you are going to have an active enrollment that you tell all of the employees they MUST complete their enrollment but behind the scenes you still let all benefits passively enroll.
If an employee comes to you after open enrollment and points out they are still enrolled, you can work with your broker to make an administrative correction.
Encourage All Employees to Complete their Enrollment Whether it is an Active or Passive Enrollment
It’s a best practice to complete your open enrollment elections every year even if all benefits are set to passively roll over. This gives you a chance to review everything and make sure you know what you have.
Even during a passive enrollment, plan designs may not change but your contributions might.
The other reason to complete your enrollment is to make sure your beneficiaries are up to date. It’s easy to forget those need to be updated if you have gotten married, divorced or had kids. With most enrollments on ben admin enrollment platforms, beneficiary elections should be part of the enrollment steps.
Conclusion
While it might make sense to have active enrollment when plans have changed, it is still a good idea to let all benefits still passively enroll – at least the voluntary plans.
You’ll want to make your FSA elections active.
Whether it is an active or passive enrollment, still encourage all employees to go through enrollment process and complete their enrollment.
