When an individual enrolls in a plan with no prior history, what may the plan sponsor do regarding compensation?

When an individual enrolls in a plan without any prior history, the plan sponsor may choose to pay a pro-rated amount based on the enrollment duration. This approach allows the compensation to reflect the actual time the individual has been enrolled in the plan.

By pro-rating the amount, the plan sponsor ensures that the compensation is aligned with the specific period during which the individual is actively enrolled. This method is beneficial as it accommodates variations in enrollment times, particularly for short-term or mid-year enrollments. Consequently, it facilitates a fair compensation structure that matches the duration of service provided to the individual.

In contrast, paying a reduced fee only does not accurately account for time on plan, and paying a full year's initial compensation amount would not be equitable for someone who enrolled partway through the year. Additionally, while a one-time bonus payment could be a part of some compensation strategies, it does not typically correspond to the individual enrollment duration rationale.