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It would be worthwhile to check the insurance contract to make sure there aren't minimum coverage requirements that could come back to slap the acquiring employer in the face.

Leaving aside discrimination based on race, sex, etc., there are no currently in effect nondiscrimination tests for fully insured plans. There are potentially issues under the cafeteria plan nondiscrimination tests, which are applicable. Although possible I suppose, I would caution is that is it not likely that "all the employees are NHCEs" because the company probably has one or more individuals who meet the definition of an "officer" under the section 125 nondiscrimination tests. That definition does not contain an income threshold. If these officers disproportionately receive higher company contributions, the employer might fail to satisfy the benefits portion of the cafeteria plan tests. Note that the consequences for failing the tests result in additional taxable compensation for the HCEs. So the company "can" have this plan design even if the tests are failed; it's just there are adverse consequences on the highly compensated.

Please let me know if I can help you find a new TPA.