Employer-subsidized COBRA premiums and Section 105(h)

[Guest erisafried]

I know that it is relatively common, particularly in the severance context, for employers to agree to subsidize the COBRA premiums for departing employees (i.e., they don't pass the premium costs through). My question is whether an employer, by not passing through COBRA premiums, is effectively creating a self-funded medical reimbursement plan under Section 105(h)--in addition to the "real" medical plan that actually offers the benefits. If it did and you were considering subsidized COBRA for a departing executive-level employee, you could run into discrimination problems.

As a practical matter, I doubt that very many (if any) employers ever consider this as a possibility. The argument seems like an unnecessarily strict application of Section 105(h) in any event, particularly when the medical plan at issue is fully insured and not otherwise subject to Section 105(h). Still, I can't point to anything definite to refute it.

Any thoughts?

UPDATE: Actually, never mind, at least insofar as insured plans are involved. I forced some clarification of the argument. Still, for self-funded health plans, I'd bet dollars to donuts that employers don't focus on the potential for discrimination when they subsidize COBRA for a bigwig who's on his/her way out the door.