Plan Assets

Plan assets are the money and property that belong to an employee benefit plan rather than to the employer. Under ERISA, once money is a plan asset it must be used only for plan benefits and reasonable plan expenses, it must be handled by a fiduciary, and it generally must be held in a trust. Employee contributions taken from paychecks become plan assets as soon as they can reasonably be separated from the employer's general accounts, and the Department of Labor expects that within a few days.

The distinction matters most for self-funded and level-funded plans. Employer money paid for claims from the company's general account is usually not a plan asset, which is why most self-funded plans do not need a trust. But employee premium contributions, stop-loss reimbursements, refunds, and PBM rebates can be plan assets depending on the plan document, and that changes who may keep them. A plan that collects $300 a month from each employee and then receives a $200,000 drug rebate has a real question about whether that rebate belongs in part to the employees. The Department of Labor has said rebates are plan assets to the extent they relate to participant contributions. A medical loss ratio rebate from an insurer works the same way: the employees' share must be returned to them or used for their benefit within 90 days.

The takeaway: if your plan receives a rebate, refund, or reimbursement, look at what share of the plan is paid by employee contributions before deciding it is the company's money. That share is likely a plan asset, and using it for anything but the plan is a fiduciary problem.