Increased premiums for new employees

[Guest qualified plan]

Are there any restrictions (e.g,. under the IRS proposed regulations) on a Company charging "old" employees one rate for heath coverage and employees hired on or after a certain date another rate (given that new employees, by defintion, are non-highly paid)?

[Guest jackmo]

We're talking about contribution requirements for the underlying health plan, right? You didn't state whether the health plan was fully insured or self funded. If self funded, there are anti-discrimination tests. You state that new employees by definition are non-highly paid. That means that the highly comped are old employees. Sooner or later, all non-highly comped employees are new employees, due to turnover. The plan will be discriminatory, if not right offf the bat.

Will the employer never hire another highly comped employee?

[Guest qualified plan]

Thanks for your reply. Yes, this is about the contribution, and the plan is fully insured and the concern is the underlying cafeteria plan and the related nondiscrimination rules.

New employees being NHCE by defintion is a function of the HCE rules. However, this should not mean that the plan is discriminatory as a matter of course. For example, if there is a healthy mix of highly's and nonhighly's currently my read is that the old group just has to pass the numerical tests (and there are disaggregation rules for employees with less than 3 years of service).

Just looking for another view to confirm this analysis.

[Guest jackmo]

If fully insured then there are no A/D tests for the health plan. And I don't see any problems for the different employer contribution levels under the 125 plan rules, unless this is a very small group, in which case you might have problems with the 25% test.