S-Corporation

[Guest ZSarah]

We are a S-Corporation. If the corp pays the health plan for the owners can they offer this coverage to their employees at their cost. In Other words, does the S-Corporation have to pay all or part of the empoyees premium?

[QDROphile]

Are the benefits provided under an insurance policy or are they covered from the employer's assets?

[GBurns]

QDROphile,

It would be helpful to many if you would elaborate on why you are making the differentiation. I, personally, wondered why you did not query the structure of the arrangement instead of the method of payment for provider services.

[Guest ZSarah]

The health insurance policy is Blue Cross/Blue Shield and it is paid out of company funds. As to structure, this is a new business that has just changed from a sole prop status to a Corporate being. The owners (2) had carried their own health insurance prior to incorporation. Since changing to a S-Corp they have hired one employee. They plan on hiring more in the coming year. They would like to offer their health plan to the empoyee but current finances would not allow them to pay their premium. Can they offer this to their employee and not be liable for their health premium? That is the question. Thanks

[QDROphile]

Medical benefits provided by third party insurance do not run afoul of section 105(h) of the Internal Revenue Code.

[Steve72]

I assume QDROphile (great screenname) was asking to determine whether a 105(h) discrimination issue existed. It appears this program is fully insured, so that doesn't appear to be a concern.

An employer can set up separate "classes" of employees with different benefits. For example, the employer could say that the two owners are part of an ownership class, and receive employer-paid benefits, while employees are eligible for employee-paid coverage.

I infer that the first employee also receives empoyer-paid coverage. Is there any classification that can be drawn between the two employees?

You didn't mention whether there is a Section 125 cafeteria plan involved. That could raise additional issues.