6.1 Pennsylvania Group Life Insurance Requirements
Key Takeaways
- Eligible groups in Pennsylvania include employer, labor union, association, creditor, and multiple-employer-trust groups, each with statutory definitions.
- Group life must be offered on a non-discriminatory basis to all eligible employees within a defined class; amounts may vary by class but not by individual health.
- The conversion period for group life is 31 days from loss of group coverage, with no evidence of insurability required.
- Converted coverage is an individual permanent (whole life) policy at the insured's attained-age rate, not term and not the old group rate.
- Contributory plans typically require 75% participation; non-contributory (employer-paid) plans require 100% of eligibles.
Why Group Life Differs From Individual Life
Group life insurance is written under a single master policy issued to a sponsor (employer, union, or association). Individual participants do not own the contract; they receive a certificate of insurance evidencing their coverage. Because the group is underwritten as a whole rather than person-by-person, most members enroll with no individual evidence of insurability up to a guaranteed-issue limit. The exam tests the distinction between the policyowner (the sponsor) and the insured (the employee), and who controls beneficiary changes (the employee).
Eligible Groups
Pennsylvania, following the National Association of Insurance Commissioners (NAIC) model, permits group life only for legitimate groups not formed to obtain insurance:
| Group Type | Statutory Requirement |
|---|---|
| Employer groups | Insures employees for the employer's benefit; the employer is policyholder |
| Labor union groups | Members of a bona fide union, organized for purposes other than insurance |
| Association (multiple employer) | Trade/professional associations active at least 2 years |
| Creditor groups | Debtors of a creditor; coverage cannot exceed the debt |
| Multiple Employer Trusts (METs) | Must be filed with and approved by the PA Insurance Department |
Exam Tip: A group cannot be formed for the sole purpose of buying insurance. Creditor group coverage is limited to the outstanding loan balance, so it decreases as the debt is repaid.
Non-Discrimination and Coverage Formulas
Within an employer group, coverage must be offered to all eligible employees in a class on the same terms. The employer may define classes by salary, position, or length of service, and amounts may differ between classes — but never based on an individual's health.
Common coverage formulas include:
- Multiple of salary (e.g., 2× annual earnings, rounded to the next $1,000)
- Flat benefit (e.g., $50,000 for all members of a class)
- Position/classification schedule (executives vs. hourly)
- Reducing schedule that lowers benefits at ages 65 and 70
Worked example: a plan provides 2× salary rounded up to the next $1,000. An employee earning $58,500 receives 2 × $58,500 = $117,000, rounded to $117,000 (already a multiple of $1,000). If a guaranteed-issue cap is $100,000, the $17,000 above the cap requires evidence of insurability.
Certificate of Insurance — Required Contents
Every covered employee must receive a certificate disclosing the essentials of their coverage:
| Element | What It Discloses |
|---|---|
| Coverage summary | Amount, type, and effective date of coverage |
| Beneficiary information | How to designate and change the beneficiary |
| Contribution | The employee's premium share, if any |
| Claims procedure | How and where the beneficiary files a death claim |
| Conversion rights | The 31-day privilege and how to exercise it |
A common trap: the employee receives the certificate, not the master policy. The master policy stays with the employer/trustee.
Conversion Rights (31 Days)
When group coverage ends, the insured may convert to an individual policy without proving good health, provided they act within the conversion window.
| Element | Pennsylvania Rule |
|---|---|
| Conversion window | 31 days from loss of group coverage |
| Evidence of insurability | None required if applied for within 31 days |
| Policy type issued | Individual permanent (whole life) — not term |
| Premium basis | Insured's attained age at conversion |
| Maximum amount | Up to the amount of group coverage lost |
Worked example: a 52-year-old leaves employment carrying $80,000 of group life. Within 31 days she may convert to an $80,000 whole life policy priced at age-52 rates — higher per-thousand than her old group rate but issued with no medical questions. If she waits 40 days, the privilege is lost and she must apply with full underwriting.
When Conversion Applies
- Employment terminates for any reason (including layoff or quitting)
- The employee moves to an ineligible class
- The group policy terminates for that class (often a lower limited amount applies)
- Dependent coverage ends
Exam Tip: Conversion gives whole life at attained age, never term at group rates. If the master policy itself terminates and was in force 5+ years, conversion may be capped (commonly the lesser of group coverage or $10,000).
Continuation During Protected Leaves
| Situation | Continuation Basis |
|---|---|
| FMLA leave | Coverage continued on same terms under federal law |
| Military leave | USERRA reinstatement protections apply |
| Disability | Waiver-of-premium or extended death benefit per policy |
| Layoff | Per policy provisions; otherwise convert within 31 days |
Participation Requirements
Participation rules guard against adverse selection — the tendency for only higher-risk people to enroll when coverage is optional.
| Plan Type | Who Pays | Participation Required | Evidence |
|---|---|---|---|
| Contributory | Employee shares premium | ~75% of eligibles | Late entrants may need evidence |
| Non-contributory | Employer pays 100% | 100% of eligibles | None at eligibility |
Because non-contributory plans automatically cover everyone, no one can self-select against the insurer, so 100% participation is required and no health questions are asked. In contributory plans, employees who decline at first eligibility and apply later are late entrants who must submit evidence of insurability.
How long does a Pennsylvania employee have to exercise conversion rights when group life coverage ends?
An employee leaving a Pennsylvania employer converts $80,000 of group life. What kind of coverage and pricing will she receive?
In a non-contributory group life plan in Pennsylvania, what percentage of eligible employees must be covered?
Which group is only permitted to insure members up to the amount of an outstanding obligation?