Mandatory Health Plan Participation

[Guest ScottN]

An employer maintains a partially self-funded plan for eligible employees. The employee is required to contribute to the cost of the plan both for the employee and dependents. The employer requires all employees to participate at minimum as an employee only.

This does not appear legal, but I am having difficulty finding the back up documentation. Any help would be appreciated.

[mbozek]

Why isnt this legal? Requiring that an employee contribute to a health or retirement plan is a condition of employment. The employee can decline to contribute by not accepting employment.

[GBurns]

Why would it not be just as legal as a demand that the employee must provide and wear a specific uniform? If it is a condition of employment, you either accept it as part of the job or you do not take the job.

[Guest asire2002]

Depending on the wages of the eligible employees, it might raise issues under the minimum wage statutes.

[Guest ScottN]

Thanks for the input. I had one attorney tell me it was not legal but I have not been able to find anything to support his opinion.

[GBurns]

As is stated quite often on these Forums, the onus of providing proof or support for statements or positions lies with the person making the statement. Let that lawyer provide the proof or support.

[mroberts]

Just out of curiosity, why the demand for mandatory participation? While this act isn't illegal (as mbozek indicates it can be a condition of employment), it could definitely raise some red flags and draw attention. The last thing you really want is your plan to be audited by the IRS.

[mbozek]

The reason for mandatory participation is to prevent adverse selection against the health carrier, eg, only older or sick employees would elect health care coverage if it was voluntary because they would be the persons using the benefits.

[mroberts]

Obviously going to the far extreme of the equation and looking at the plan as completely voluntary, yes adverse selection would be a good reason to require mandatory participation. The poster only indicates that contributions are required and this could mean that employees only have to pay 10% of the premium equivalency rates.

[Guest ScottN]

I don't know the reason behind the mandatory participation but assumed it was the fear of adverse selection. In most cases where participation is mandatory, however, I have seen employees have the option to waive coverage when they can provide proof of other coverage. This plan does not include that option.

In addition, employees are required to contribute 40% of the cost regardless of enrollment type. Last, I have seen some documentation that state payroll laws may prohibit withholding contributions from employee's paychecks without the employee's permission. I am now trying to verify this with.

[mbozek]

State payroll laws applying to benefit plans are preempted by ERISA 514.

[GBurns]

Can you give any cites for this opinion that ERISA preempts state payroll laws?

Why would any state payroll law apply or relate to any benefit plan?

State and federal payroll laws apply to payroll and what happens on the payroll. The deduction from an employee is a payroll issue not a benefits issue.

Try making deductions that reduce the employee below minimum wage and see what applies. Try withholding without the employee's permisssion and see who takes the action against the employer.

[Guest kowen]

I agree that you can make participation a condition of employment when hiring someone. But can you establish a new contributory plan and make participation mandatory for existing EEs?