Can a company with a self-insured plan not charge retiring executives for COBRA coverage while charging everyone else?

[Guest gjdavid]

I have a client that provides retiree medical coverage to certain officers through a fully insured medical plan at no cost to the officer. As you would expect the premium for those under age 65 is astronomical. For those over 65 the company buys a medicare supplement.

The company has asked if they to keep these individuals in their self-insured plan for at least 18 months (presumably under COBRA) without charging them the COBRA premium.

My reaction was no, but I am having trouble identifying specific authority. The non-discrimination rules under 125 or 105(h) would not seem to apply. Any thought?

[Guest b2kates]

If they are being provided coverage under a self-inusred program, why would section 105(h) not apply?

Arguably this could be deemed to be discriminatory.

I agree that under a fully insured program discrimination is not an issue.

[Guest gjdavid]

I think you are right. When I think about it 105(h) is hard to oversome. What about the idea of having the company pay the COBRA premium for the executive and 1099ing that amount? This would still be cheeper than the full insured premium cost. What do you think?

[Guest taylorjeff]

Hopefully this helps.

Looks like retired HCEs would need to be included in the testing.

Sec. 1.105-11 ©(3)(iii) Retired Employees.

To the extent that an employer provides benefits under a self-insured medical reimbursement plan to a retired employee that would otherwise be excludible from gross income under section 105(b), determined without regard to section 105(h), such benefits shall not be considered a discriminatory benefit under this paragraph ©. The preceding sentence shall not apply to a retired employee who was a highly compensated individual unless the type, and the dollar limitations, of benefits provided retired employees who were highly compensated individuals are the same for all other retired participants. If this subdivision applies to a retired participant, that individual is not considered an employee for purposes of determining the highest paid 25 percent of all employees under paragraph

(d) of this section solely by reason of receiving such plan benefits.