Participation in Cafeteria Plan

[mal]

Received a call today about a union and governmental employer that want to limit eligibility to participate in the Cafeteria plan to only those employees who have not waived employer provided health coverage. (Why? I have no idea) I am not comfortable with Section 125 plans and am starting to do some research. The plan covers only collectively bargained employees, none of whom are highly compensated.

This doesn't "smell" right to me. Aren't there numerous welfare decisions and regulations which hold that plans must have a rational basis for differentiating among similarly situated groups of participants?

A push in the right direction would be appreciated.

[Joe Priselac]

Mal,

I work with many unionized governmental groups. Many of the typical concerns or rules do not apply in these situations. ERISA along with most of the nondiscrimination rules one would normally be concerned about do not apply. You can bargain a Cafeteria Plan with the eligibility rules you specified. I believe that the newest incarnation of the Section 125 regulations allows for such an eligibility rule for "regular" groups.