Grant money?

[Guest tintree73]

A not for profit organization (501©(3)) has controlled group of three entities and all entites are in one cafeteria plan (flex credit dollar arrangement). One of the qualified benefits offered under the cafeteria plan that flex dollars may be applied to is insured health coverage (HMO options, etc.)

One of the entities (covering 33 of 250ish employees in the controlled group) applied for (and is approved to receive) grant money to increase the employer contribution paid for the 33 employees - but not any of the other employees in the controlled group (the other entities were not part of the grant).

Can this be done? I just can't think of a way to do it - isn't there a discrimination issue? What about FICA issues? Would a separate plan have to be set-up to accomplish this?

Any thoughts would be greatly appreciated!

[leevena]

Could you describe why the subsidy is being offered? For example, was the money made available to employees because of an income threshold? This may help us better understand the implications. There are health plans available in California that have money available for lower income employees. The question of discrimination is different under this type of situation.

[Guest tintree73]

Wow that was quick! Thanks for responding!

To answer your question, the money was requested because employers in the geo-area (of the member of the controlled group that employs the 33 people) generally pay a higher percentage of the employees health care coverage than the employer currently provides. The money was requested to increase the employer contribution for the 33 employees to make up the difference.

The money was also requested so employees did not feel pressured to choose a lower coverage option (that is cheaper) so they would have the flex dollars (from the savings of using the "cheaper" option) to use for other benefits under the cafeteria plan.

The employer of the 33 individuals is in OH - I'm not sure if that makes a difference or not.

Thanks again!

[Guest tracie117]

Wow that was quick! Thanks for responding!

To answer your question, the money was requested because employers in the geo-area (of the member of the controlled group that employs the 33 people) generally pay a higher percentage of the employees health care coverage than the employer currently provides. The money was requested to increase the employer contribution for the 33 employees to make up the difference.

The money was also requested so employees did not feel pressured to choose a lower coverage option (that is cheaper) so they would have the flex dollars (from the savings of using the "cheaper" option) to use for other benefits under the cafeteria plan.

The employer of the 33 individuals is in OH - I'm not sure if that makes a difference or not.

Thanks again!

Although I can't answer all of your questions, I can tell you that the "flexible spending account" dollars are separate from health insurance premiums. Perhaps I'm not understanding correctly, but usually the way it works in Mass anyway is that all health insurance premiums are paid pre-tax and that is not affected by your FSA election amount. If the company in questions is indeed a separate entity from the rest of the company which is the way that it sounds, then I wouldn't think that there would be an issue, as far as discrimination, because if the company is already paying for the higher plan for the other "sections" it would make sense that this controlled group is the one being discriminated against and not the other way around. Just my opinion of course.

[Guest mjb]

The employer can discriminate in the amounts of premiums paid on behalf of employees to an insured health plan. It doesnt matter what the source of the contributions are, grant money, employer funds, etc. Employer contributions are not subject to FICA or income tax.