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medical covarge option for ineligible employee(s)


Guest Pecos

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Goal: Find a way to help an employee(s) and or dependents stay with the company even if they loose their coverage under the cafeteria plan (such as full time to part time status) (after COBRA) (not looking for any special tax breaks)

questions: Could a part-time employee pay after tax premiums to be on the same cafeteria plan? Or have some kind of separate after tax plan for the employee/dependent, or have the company pay individual insurance premiums for them, or maybe an HSA (not really familiar with HSAs). Could medical expenses for part time employee(s) be paid from general assets of a company or should it be paid directly from a plan? Just trying to figure out a way to keep a part time employee(s) from going somewhere else if they can no longer work full time.

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I am somewhat confused by the entire post.

The health insurance plan is not the cafeteria plan. They are 2 separate things.

The health insurance is not the employee benefit plan.

The employee benefit plan is not the cafeteria plan.

Any employee can pay after tax or pre-tax if they are eligible for coverage under the terms of the employee benefit plan and the policy terms of the health insurance coverage.

If an employee is paying insurance premiums after tax, it has nothing to do with the cafeteria plan.

An employer can pay for or reimburse insurance premium and/or medical expense frm a plan. If paid from general assets it must be according to a plan. I think that you are misunderstanding the meaning of "plan". It is simply an arrangement usually in writing.

An employer can have separate health plan for part-timers only.

The above are simplistic because I am not sure that I understand.

What undustry or type of business would be helpful in order to possibly give you examples of what others are doing.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Goal: Find a way to help an employee(s) and or dependents stay with the company even if they loose their coverage under the cafeteria plan (such as full time to part time status) (after COBRA) (not looking for any special tax breaks)

questions: Could a part-time employee pay after tax premiums to be on the same cafeteria plan? Or have some kind of separate after tax plan for the employee/dependent, or have the company pay individual insurance premiums for them, or maybe an HSA (not really familiar with HSAs). Could medical expenses for part time employee(s) be paid from general assets of a company or should it be paid directly from a plan? Just trying to figure out a way to keep a part time employee(s) from going somewhere else if they can no longer work full time.

It sounds like you want to offer health insurance to part-time employees to keep them at your firm. Most carriers will go down to 17.5 hours per week. You can continue to include them in your caf plan with pre-tax salary reductions. You could charge more in contributions if desired than FT because PT is a "reasonable classification".

Or if you want them to buy their own coverage, new caf regs say that the cost of non-group coverage can be taken pre-tax from them and the employer either reimburses employee back or employer pays insurer directly. I think that's messy, especially with limited caf plan election changes. And most people won't medically qualify for inexpensive coverage.

FYI, if you pay medical expenses directly from general assets, you've set up an ERISA plan. Who is going to adminster claims, prepare the plan doc and SPD? How much in benefits will be paid? Definitely rethink that idea!

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That was a vague posting, sorry for the confusion. (LMPett figured it out)

In simple terms we want to cover certain part-time employees under the health plan to prevent them from leaving the company (we don't want to set up a retirement plan as of yet)

The type of business: C Corp publicity traded, plan type: H&W plan (over 100 EEs & dependents), eligibility 40 hours per a week

It sounds like we have two options for part-time employees based on your comments:

1) Separate plan

2) Lower minimum hours required (for some reason I thought it was 30) glad it can be 17.5 & still pretax

Either of these could work to prevent losing employees from retirement. Do part time employees have the same discrimination testing? Could we only cover part time employees that are (example only) accountants, execs/board, or based on compensation?

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The 17.5 hrs has to do with insurance carrier requirements not pre-tax requirements.

Separate health insurance coverage would most likely be dictated by the insurance carrier, so a separate health plan would be a good idea.

By the way, a H&W plan is not the same as the health insurance plan(coverage). Health insurance coverage is just one of the benefits provided under a Health & Welfare Plan. You probably will have to amend the H&W Plan Document to allow a health plan(coverage) for the part-timers.

Discrimination rules and testing depends on what you decide to do.

PT is a reasonable classification.

If there will be a cafeteria plan attached then those discrimination rules will also apply.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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That was a vague posting, sorry for the confusion. (LMPett figured it out)

In simple terms we want to cover certain part-time employees under the health plan to prevent them from leaving the company (we don't want to set up a retirement plan as of yet)

The type of business: C Corp publicity traded, plan type: H&W plan (over 100 EEs & dependents), eligibility 40 hours per a week

It sounds like we have two options for part-time employees based on your comments:

1) Separate plan

2) Lower minimum hours required (for some reason I thought it was 30) glad it can be 17.5 & still pretax

Either of these could work to prevent losing employees from retirement. Do part time employees have the same discrimination testing? Could we only cover part time employees that are (example only) accountants, execs/board, or based on compensation?

You do not need or want a separate plan. You should contact your broker/agent (or the insurance co. if you don't have one) and ask them how low in eligibility hours you can go on your plan. Just remember then all PTs who meet your new requirement will be eligible. There is no discrimination testing for fully-insured medical plans but the insurance co. will never agree to set up an eligibility class by title -- simply by hours. You just need to change your eligibility from 30 hours/week to 17.5 or 20/hours/week. I won't go into caf plan discrim testing....but trying to offer benefits in a caf plan that favor highly comp ees is a no-no. Again, it will never get that far with an insurance company.

If your medical plan is self-insured, 105 discrimination rules apply for highly comp benefits, or benefits based on yrs of service or compensation.

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