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Section 125 nondiscrimination pre-tax medical ins without cash out option


Guest kimb

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Guest kimb

In our situation, the employer pays employee only major medical insurance premium. Employees can pre-tax family potion. There is not a cash out option if the employee declines the insurance. We have noticed that most discrimination rules do mention a cash out option where the employer will provide cash if employee declines non-taxable benefit.

How do the discrimination rules change in our situation?

And in our situation, should the employer provided potion be mentioned in the plan doc's?

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In our situation, the employer pays employee only major medical insurance premium. Employees can pre-tax family potion. There is not a cash out option if the employee declines the insurance. We have noticed that most discrimination rules do mention a cash out option where the employer will provide cash if employee declines non-taxable benefit. How do the discrimination rules change in our situation?

What is different about your situation? The fact that no cash in lieu of premium is offered? I believe that is much more common than offering cash. The discrimination rules and nondiscrimination tests do not change in any event.

And in our situation, should the employer provided potion be mentioned in the plan doc's?

The "employer provided potion" (stricknine?) should be mentioned in the plan documents as well as in the summary plan description.

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But seriously, you need to recognize that the employee coverage is not part of the cafeteria plan. Only the part that that involves a choice between a nontaxable benefit and the cash is subject to section 125 and its discrimination rules. It would be difficult to make sense of the arrangement if the employee coverage is not mentioned in documents, and the employee coverage is a health plan that needs documentation. How you configure the documents does not change the substance or character of the benefits. A well-drafted document will make the proper distinctions.

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