Difference in STD Plan based on Employee locations

[Guest cdettmer]

Is there anything statutorily to prevent an employer who has an ERISA governed Short-term disability welfare plan from offering a difference in plan coverage to employees at one location in comparison to that offered employees in all other locations?

[KIP KRAUS]

Except for the five states that require statutory STD benefits I would say that a case could be made for providing different levels of benefits to employees residing in different states or cities based on the norm for the area in which they reside. Even in the statutory states one can provide a higher level of benfits than those mandated.

The only thing I would consider when providing different levels of STD benefits is that it doesn’t discriminate in favor of the HCEs, or discriminate against females.

This is just my opinion, but I’ve never heard of any specific legislation that would restrict offering different levels of STD benefits.

[Kirk Maldonado]

What are the adverse tax consequences of providing STD benefits that discriminate in favor of highly compensated employees?

[KIP KRAUS]

Wouldn't the premiums paid on behalf of the HCEs be taxable income as well as the income taxes on any benfits recieved?

[Joe Priselac]

If the plan is fully insured, there are no discrimination rules that have to be complied with. Absent insurance company restrictions, you can pick and choose who you want to cover and for how much. In New York, one of the states that mandate a minimum level of STD coverage, as long as you give everyone that state minimum you can give the highly compensated an enhanced benefit. There is no adverse tax consequence and is a common practice especially among executive owners.

[Guest cdettmer]

I just wanted to thank everyone for their replies. You all have been very helpful.