Employer co-pay and discrimination.

[Guest Thornton]

For health insurance and life insurance, can an employer co-pay at higher levels for the highly compensated group than for the non-highly compensated group? For example, can the employer co-pay 100% of health and life insurance premiums for vice-president and above and 50% for all other employees? What effect does this have on discrimination?

[Joe Priselac]

The answer to your question depends on whether the insurance is self-funded or not. If the employer provides health benefits on a fully insured basis, then they certainly can fully pay for the insurance of the vice-presidents and make the regular employees pay for all or part of the insurance.If the employer has a self-funded plan, the discrimination rules under IRC Section 105 come into play. Hope this brief synopsis is helpful.

[Guest Thornton]

Joe, if the employee part of the premiums are paid through a 125 plan, would this change your answer?

[Joe Priselac]

Thornton,

The answer remains the same. The premiums paid in full by the employer are not part of Section 125 and are not included in any discrimination testing.