opt out implementation

[Guest pc pete]

We currently pay 100% (ind and family) for partners and salaried employees benefits and 100% (ind only) for hourly employees. If we were to implement an opt out policy (reimbursed 50% of employer cost) is there a discrimination issue? Also, if we did this opt out (same as above) for just salaried employees is there a bigger issue?

Any help would be greatly appreciated.

[Guest Matt J]

I am not an attorney, but my understanding is that it would be discriminatory because it violates the benefits/contributions test. That test looks at the benefits offered and if there are different benefits offered to one group over the other, then discrimination exists. Whether or not the IRS will come down on that type of discrimination is a separate question. I would discourage that type of opt out payment for one group.

As far as a larger issue, I think the employer is running a risk of bad relations with their hourly population if they push forward with this idea. How would that make you feel if you happen to be an hourly employee who has other coverage available, but you cannot receive the same incentive to opt off the plan, especially if it is a large $ amount.

[GBurns]

What is the reason for including partners in your plan?

If you offer the opt out it should be to both groups, anyhow.