Separte Insured Medical and Cafeteria Plans

[Guest Mrilaomt]

I just want to make sure I have this straight and you all seem to be experts.

We currently offer an insured plan (e.g., No. 501) product to all employees. We offer a separate plan that acts as a premium conversion arrangement for the insured plan and contains a health FSA portion (e.g., No. 502).

To date, employer contributions toward the insured product (No. 501) have been the same for all employees (X employer contribution per employee and the employee picks up the rest with the premium conversion).

Now, management would like to consider paying the full cost of the premium for the the executive management employees in the insured arrangement, but leavnig the 125 plan "as is".

I know that insured health plans do not have to meet the 105(h) discrimination tests - but does this structure create a problem? It appears that if it was one plan it could not be done - but if it is two plans, are we able to separate out the insured benefits and pay more for the highs?

[jpod]

I won't claim to fully understand how the Section 125 nondiscrimination rules work, because they're not writtin in the English language as far as I'm concerned. But, I've always felt that you actually lessen the risk of discrimination by providing fully-paid coverage for HCEs and Key Employees in situations like yours (i.e., because they are not using any nontaxable benefits under the Section 125 plan, or at least the premium conversion component of the plan). Ironic? Yes, but I think this is how it works.

[Guest Mrilaomt]

Thanks! I appreciate your input.