“Free” Cafeteria Plan Administration

By Molly Mulebriar

Brokers should be cautious yet most don’t seem to be as evidenced by the prolific offer and acceptance of “free” Cafeteria Plan administration services, especially among Texas public school districts.

In some instances the servicing of risk may be construed as unrelated to the insurance product procured through a broker and may be determined by a state insurance commission to be an impermissible rebate or inducement.

An example of an inducement is the offer of “free” cafeteria plan administration services in in exchange for selling insurance products for a commission.

In most states, all insurance brokers generally are forbidden by law from providing their customers with rebates or inducements. However, we see little enforcement by state regulatory agencies. The prevalent use of “free” Cafeteria Plan administration is a stark example.

Brokers can provide services beyond placing insurance though. These include providing risk assessments, insurance consulting services, insurance-related regulatory and legislative updates, claims assistance services, assisting with employee enrollment, and helping to resolve benefit issues.

Brokers should be cautious yet most don’t seem to be as evidenced by the prolific offer of “free” Cafeteria Plan administration services, especially among Texas public school districts.

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