Company Paid Premiums

WITracy

Our company would like to begin paying for all VP level & above employee's health insurance premiums (for employee & family). Currently, employee's pay 20% of their own & 100% of their family's premiums.

First of all, is it OK to offer this to one classification & not all? It's my understanding that as long as it's not discriminatory towards a protected class, we can design our benefits however we choose.

Secondly, if the company pays for these premiums, does the employee have to claim what was paid as income?

Thanks.

Brad Forrister

[font size="1" color="#FF0000"]LAST EDITED ON 01-20-03 AT 02:54PM (CST)[/font][p]Generally, you're right - you can make this kind of differentiation in your benefits structure. (Unless you're a self-funded ERISA plan, in which case you would have to worry about discrimination in favor of highly compensated individuals.)

And health insurance benefits - including family benefits - aren't treated as taxable fringe benefits by IRS.

But it does seem like the sort of benefits decision that can negatively affect morale of everyone below the VP level when they find out about it. In essence, you're giving the benefit to the one group probably best able to pay for it themselves.

Brad Forrister
Director of Publishing
M. Lee Smith Publishers

Parabeagle

I agree with Brad. Best batten down the hatches and prepare for rough waters on the Sea of Morale once the line employees learn of this.

Theresa Gegen TX

You need to get with your ERISA and tax lawyers. It is a very complicated regulation and does have non-discrimanation provision (and rather specific tests) that relate to highly compensated employees. Those provisions can effect whether the plan qualifies for tax deductions.

Good Luck!

Rockie

Like many companies, we use this as a recruitment tool for senior executives, physicians and midlevel providers. It's always been this way as far as I can tell. I can see your point about it being unfair to lower paid employees, especially if this is something you are going to change.

In our case, this is generally accepted in the medical field and we would be unable to attract candidates if we did not pay for this perk.