Welfare plan - pre-tax contributions

[Beemer]

A client wants to require their two employees to make pre-tax contributions for medical benefits. They don't want to give them a cash or deferral election, but they would have to take the payroll deduction. I don't believe this would count as a cafeteria plan because they couldn't take the cash, but can they require the pre-tax contribution from the employees?

Thanks

[QDROphile]

The employer wants to cut wages and increase the employer contribution for medical benefits. Why does the employer want to dress it up differently, in a way that has an air of wrongness about it?

[Chaz]

Are you saying that the employees would not have a choice whether to take health insurance and that paying for benefits is a condition of employment? If so, you are correct that no cafeteria plan is necessary. This is permissible, but, as QDROphile alludes, it is not a common plan design.

[Beemer]

I think they just want the employees to pay for it.

[leevena]

A client wants to require their two employees to make pre-tax contributions for medical benefits. They don't want to give them a cash or deferral election, but they would have to take the payroll deduction. I don't believe this would count as a cafeteria plan because they couldn't take the cash, but can they require the pre-tax contribution from the employees?

Thanks

Employer cannot require employee to pay for anything. The employer can require premiums paid by the employee run their contributions through a POP.

[QDROphile]

If your only tool is a hammer, every problem looks like a nail.

[GBurns]

If it was a condition of initial employment, then a one time irreversible election might be allowed as done in Re Express Oil Change..

If, however, the existing employees are going to reduce their earnings, this would be electing a deferral which would require a POP Cafeteria Plan with a salary reduction agreement. They are giving up cash for deferral.

I do not think that the law allows an employer to mandate that an employee pay for anything such as this. Isn't this similar to the individual mandate problem the White House is having with ACA?

[Chaz]

I am not aware of any law that prevents an employer from requiring its employees to purchase health insurance as a condition of employment.

In my view, a cafeteria plan is not required in this scenario because the employees are not given a choice between receiving health benefits and cash. Their only choice is between a job with health benefits and unemployment.

This is not a comment as to the advisability of this scenario, just a comment on the law.

I'm not seeing a connection between this and the individual mandate. Am I missing something?

[GBurns]

If these were potential employees and this was part of the job offer, I would agree, but, these are current employees who are already under agreed conditions.

I would think that a condition of employment is ... This is how it will be done IF you take the job.

To make the change afterwards is a change of conditions.

To make the change afterwards and make it mandatory with no choice is different but still a change of conditions.

To make the change afterwards and make it mandatory with the threat of termination is a whole different ball game.

[Chaz]

In the case of at-will employment, which I assume is the case here, and in the absence of a contractual promise, which I assume is not the case here, an employer can change the conditions of employment at any time and for (most) any reason. The change is in consideration for employment going forward.

[Beemer]

It looks now like the employer is going to be comfortable implementing this. Thanks everyone for your input.

[Everett Moreland]

In many (most?) states this would violate the state's wage withholding law. These laws generally prohibit a payroll deduction not authorized by the employee in writing. The safer way to do this is, as QDROphile states, cut wages and increase the employer contribution for medical benefits.

[Chaz]

This is out of my area of expertise but couldn't the employer require the employees to sign an authorization (again, as a condition of employment)?

[leevena]

This is out of my area of expertise but couldn't the employer require the employees to sign an authorization (again, as a condition of employment)?

No, no, and no!

[Chaz]

No, no, and no!

Why not? (Assuming it's at-will employment.)

[leevena]

No, no, and no!

Why not? (Assuming it's at-will employment.)

at will has nothing to do with it. The employer could require participation and cost contribution if it's part of an employement contract only. If there is no contract, there can be no forced enrollment/payment.

[GBurns]

There has been no mention of a contract by the OP. All that is known is that the employer wants to make the change.

[Chaz]

No, no, and no!

Why not? (Assuming it's at-will employment.)

If there is no contract, there can be no forced enrollment/payment.

Again, I'm not sure why not. What law prohibits it?