Different employee contribution amounts - NOT and HCE/non-HCE issue

[Guest Debbie Button]

:confused:

We are looking at merging two companies in the near future. Both are wholly owned sub's under a parent company. Company A currently has a 20% ee contribution rate for medical/dental plans for single employees and 25% for ee + 1 and families. Company B is entirely employer paid.

Company B would like to ease their employees into the 20%/25% structure we have by allowing them to pay a smaller percentage and raising it over the years, say 8% year 1, 8% year two, and 9 % year three for families.

Other than the morale issues we'll be faced with (there are employees of both companies that work on the same contracts currently, won't it be great when Joe from Company B says he's getting the same HMO for $10 month and Sam from Company A says, hey, I'm paying $30!!! - I'm not looking forward to that), is this legal under Section 125 (we have both insured and self insured plans) or 105?

Thanks!