Eligibility Test for Self-Insured Health Plan

[Guest omajes1]

I know that self-insured health plans must comply with the nondiscrimination rules of IRC section 105(h). However, this section allows you to "exclude" a lot of people for purposes of passing the "eligibility" test. Our plan would like to cover all employees that work more than 25 hours per week AND cover only highly paid employees who work less. While this certainly seems discriminatory in theory, it appears to pass the eligbility test. Any thoughts or comments? Thanks.

[KIP KRAUS]

Sounds as though it could be considered discriminatory in favor of the HCs, because you are requiring non-HCs to work 25 hours in order to get benefits. This is just my gut feeling.

On the otherhand, if you don't or never have Non-HCs who work less than 25 hours why not just make the eligible class all employees of the company? If you are going to be so generous as to allow participation at a level of 25 hours, why not go with it for all employees?

[Guest Paul]

The regs under IRC 105(h) says the plan can not operate in a discriminatory manner. Therefore, although the plan, on its face, may pass the percentage test, it still may be discriminatory. As a practical matter, I am not sure it will ever come to light but that is not a reason to ignore the rules.