Salesperson's eligibility tied to sales?

[Guest FAQ]

A company has proposed conditioning their salespeople's eligibility for their self-insured health plan on sales production. Since the salespeople work on commission, this basically translates into eligibility based on their pay level -- for example, if a salesperson makes $60,000 they are eligible for health benefits; if not, they get no health benefits.

I don't find anything in ERISA that sets forth parameters on how eligibility for a health plan can be set (though obviously eligibility has to be determinable and outlined in the plan document). I see the bigger problem being the tax Code -- sections 125 and 105(h) and their complicated nondiscrimination rules.

Unless the employer is prepared to force highly compensated individuals to pay for the full cost of their health insurance on an after-tax basis, I don't see this strategy being workable.

Thanks for any thoughts in advance.

[Guest taxesquire]

Unless the employer is prepared to force highly compensated individuals to pay for the full cost of their health insurance on an after-tax basis, I don't see this strategy being workable.

Thanks for any thoughts in advance.

I think this would only be an issue for HCE salespeople. Employers can exclude employees based on classes other than hours worked and status as HCE/NHCE.

I happened to come across a blurb about a case today - this was COBRA research - about a court that held that if a person lost health coverage b/c he didn't meet his sales goal, that was not a COBRA event. That signifies to me that there wasn't an ERISA or 125 issue either, but I can't say for sure.

[Jacmo]

I don't see it as based on pay. It seems to be based on production, regardless of pay (unless someone has carelessly made a pay related statement). But as you noted, production parameters will have to be spelled out in the documents.

A loss of eligibility would be a triggering event under a 125 plan.

I would be interested in seeing all the facts and circumstances in the COBRA case.