Reimbursing deductibles under 105(h)

[Guest 5500]

Company has insured medical coverage available to all employees. Company pays premium for single coverage, employee's pay additional for family coverage thru 125 plan. Company also reimburses employees for medical claims until the insurance policy deductibles are met.

Question, can the nondiscrimination testing for the self-insured portion be limited to only those employees participating in the insured product? Many of the NHCE's have chosen to take family coverage through their spouse's plans. If they can be excluded on the basis that they chose not to participate in the insured portion there is no problem. If they cannot be excluded on that basis, there is a problem.

Any help is appreciated.

[Kirk Maldonado]

What do the statute and regs say?

[Guest 5500]

Kirk:

I have to admit the code and regs are not clear to me on this. All I see is that the self insured portion is subject to the testing and the insured part is not. At first glance this leads me to believe the only excludable employees are those spelled out in the regs, and I would have a problem because I could not exclude employees waiving coverage under the insured portion.

Then again, if it is looked at as one plan, I can see how testing is limited to participants taking the insurance coverage. In searching this site I found an old thread saying that the reimbursement only had to be offered to the participants in the insured portion; unfortunately there were no cites to support this view.

Sorry if I'm a little dense on the subject, but I'm just not sure of this.

[Kirk Maldonado]

If the statute and regs don't allow it, I don't see how you could do it. Otherwise, you could set up a classification that excludes everybody but the senior executives, which would completely get around the 105(h) rules.