Guest Thornton Posted May 21, 1999 Posted May 21, 1999 An employer sponsors a premium-only health insurance plan. It currently pays the same portion of the premium for all employees. Can it pay different percentages of the premium for different classes of employees (like it could without a 125 plan) without the plan being discriminatory?
Guest victoria davis Posted June 5, 1999 Posted June 5, 1999 Because the premiums are paid through a cafeteria plan, the premiums are subject to the discrimination tests under Code Section 125. This means that they must pass both coverage and benefits tests. The only way to satisfy the tests if you have different contribution rates for different groups of employees is to separately satisfy the coverage test for each group. This will generally be possible so long as the employer is paying more for the less highly compensated employee groups. Until recently, the IRS did not audit for this, but the IRS is now actively auditing for discrimination in their cafeteria plan audits.
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