lower employer contribution on behalf of part-time ee's allowed to par

[Guest kurt johansen]

Employer has cafeteria plan with employer contribution and health insurance option and health FSA.

Employer would like to include part-time employees but wants to make a lower dollar contribution (seems reasonable since they won't be working as much they shouldn't get as large of a contribution). Employer could exclude part-time employees completely from plan so if they are allowed to participate can they be given a lower employer contribution? It doesn't seem fair to punish the employer for giving lower benefit contribution when other employers give nothing. Before you answer consider the following points:

1. Section 125 has special nondiscrimination rules for health benefits that requires employer contribution to be equivalent dollar for dollar up to a level equal or greater than 100% of health benefits received by majority of similarly situated HCEs or 75% of health benefits of HCE with largest health benefit. This rule appears to prevent lower contributions for part-time employees at least to the extent that the lower contribution does not meet the 100%/75% rule. When determining the HCE health benefit level do administrators include benefits under a health FSA? A health FSA is after all required to be a health plan under the regulations. If administrators do not include the health FSA benefits can you cite some authority or reasoning why not.

2. Can employer set up a separate cafeteria plan with a lower level of contributions for part-time employees? These employees are excludable so they would not cause the full-time plan to flunk the elegibility test.

any thoughts on the

[GBurns]

You have me confused. What does the requirements for HCEs have to do with part time vs full time?

An employer can have more than 1 Cafeteria plan.

An employer can have classes of employees. Each class can have different benefits.

You have also confused employer contributions with an FSA.An employer can contribute to a Cafeteria plan without there being an FSA. Most Cafeteria plans are Premium Only (POP) or premium Conversion and dont have the FSA component.

[Guest kurt johansen]

GBurns, hopefully this post will clarify things for you. I understand that a cafeteria plan does not have to have a health FSA but this one does. It also has a pre-tax premium component, dependent care reimbursement, adoption assistance, and life insurance (under $50,000). Its what I would call the whole enchilada. The employer makes contributions to each full-time employee but want to make a smaller or no contribution to part-time employees (under 25 hours per week). My understanding of Section 125 is that if the cafeteria plan provides health benefits, it must meet the requirements of 125(g)(2). 125(g)(2) states that contributions for non HCEs must be equivalent to contributions for non HCEs up to 100% of the cost of health benefits for the majority of the similarly situated HCEs or 75% of the cost of health benefits for the HCE with the highest cost health benefits. Are you saying that I am misapplying Section 125(g)(2)?

[GBurns]

Yes.It says what HCEs get not what non HCEs get.It says that it "shall not be treated as discriminatory if"... then it relates what HCEs can get not what the non HCEs get in relation.