Domestic Partner Coverage for Part of an Employee Group

[PhilB]

My company sponsors a cafeteria plan that covers several subsidiary companies and employee groups under one medical plan design. We are considering offering domestic partner benefits to same sex couples, but are thinking of rolling it out first to only one of the business units (a subsidiary) as a "test case.” Are there any discrimination issues we could conflict with in offering DP benefits to one subsidiary business unit vs. another when both are covered under the same cafeteria plan?

[jsb]

DP benefits cannot be offered under a "cafeteria" plan. Income must be imputed (federal taxes, state taxes may or may not apply) for the value of the employer-paid portion of the benefits and any employee-paid amount must be taken post-tax (again, state tax laws may vary).

[PhilB]

Yes, we will apply the imputed income to the employee's earnings. But can we offer the coverage to only one segment of the employee population without discriminating against the other? I am aware of no such rule that would prevent us from doing this at this time but want to double check.

[jstorch]

Is the subsidiary's employee demographic representative of the company as a whole?

If the subsidiary had a disproportionately higher concentration of highly compensated employees, discrimination could be an issue.

[PhilB]

No, it is representative and made up of administrative exempt, non-exempt and factory employees.