Domestic Partners and employee premium payment

[jstorch]

I am advising an insurance agent who is working with an employer who offers domestic partner insurance benefits, both same and opposite sex DPs. Employer has structured the cafeteria plan so that an employee with a domestic partner in the health plan must pay the entire insurance premium after-tax (rather than allowing the employee's share of the premium to be paid pre-tax through the cafeteria plan and the DP's share paid post-tax). I assume this is to avoid administrative issues and costs in keeping track of split payments but have not discussed with the employer directly.

Is there anything prohibiting this arrangement? One concern I have is whether, based on employer census, this violates the cafeteria plan nondiscrimination rules. Effectively, this structure means that employees electing coverage of domestic partners under the health plan are ineligible for the pre-tax premium payment portion of the cafeteria plan. If a disproportionate number of so-electing employees are non-highly compensated employees, then there may be a (HCE/NHCE) discrimination issue.

Has anyone else run into a similar arrangment?

[QDROphile]

Cafeteria plans are subject to a utilization test, section 125(b)(2), but you would have to have a small company or extreme selection to fail.

I don't see how you can fail eligibility requirements. Every employee can have the same pre-tax benefits. There is room for agument about what it takes to "benefit" under the plan, but I don't think the eligibility test is actually a utilization test.

If you can identify the third test, maybe someone will comment on it.

The fourth test is not a cafeteria plan test. The fourth test is a professional responsibility test. If your client is expecting you to advise on this issue, what are you going to do to provide adequate advice? What if you got four responses and all said it was OK because they do it? Would you put your client on the line on that basis? Or would you act only on a negative stopper?

[LRDG]

The 125 plan document should reflect the basis for determining eligibility for EE coverage. Typically it's service based (full time, minimum # of hours) age range, etc., and also define the basis for determining how EEs w/DP coverage fail to meet eligibility otherwise met by all other EEs w/health coverage.

I have very little confidence that excluding this group of EEs would be viewed as anything but discriminatory.

There is no employment based classification to justify excluding the EE portion of the premium.

[QDROphile]

No employee is being excluded. The employee can choose coverage. What is happening is that if the employee wants domestic partner coverage, the employee has to choose to get coverage by means other than through the cafeteria plan (after tax). There is is no discrimination with respect to eligibility.

[Jacmo]

Seems to me that the employee has been denied the pre-tax choice on the basis of having a domestic partner.

[QDROphile]

The post did not say so, but I bet the plan does not prevent an employee from getting individual coverage, paid through the cafeteria plan, because the employee has a domestic partner.