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Discrimination testing when offering multiple health plan options

Guest ant

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I have a question that I have been searching high and low for a clear andwer on and have not found one. Here is the fact pattern:

Employer offers two health plan options to employees, 1 HMO and 1 PPO. Total premiums for the HMO are on average $9,000 and the employer pays $7,000. Total premiums for the PPO are on average $13,000 and the employer pays $8,500. All premiums are excluded from medicare taxable wages (no payroll or other tax applied).

All full-time Employees are eligible to participate in either of these plans with those levels of contribution. Due to the lower employee premium cost of the HMO plan, most low wage employees choose that plan while a higher percentage of the higher wage employees opt for the PPO. The average wage of a participant in the HMO plan is around $25 and the average wage of a PPO plan participant is around $41.

My understanding is that for premium only plans the safe harbor eligibiltiy test is all that must be met. Does the fact that there is no discrimintation in what is offered to employees mean that the eligibility test is met? Or since the PPO is weighted towards higher compensated employees higher wage employees and PPO members get 1) a higher premium contribution from the employer and 2) more wages sheltered from taxable wages is the eligibility test potentially failed?

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