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Compliance Q&A: Classing Out Executive Benefits

Summary

We often see employers presenting benefits strategies that involve treating classes of employees differently. While the general rule is that plan sponsors may vary benefits, contributions, and eligibility criteria based on bona fide business classifications, there are some compliance considerations for employers to keep in mind. Self-insured health plans must comply with Section 105(h) nondiscrimination rules. Regardless of funding status, any plan that allows employees to pay benefits premium on a pre-tax basis must follow the IRS’ Section 125 cafeteria plan rules. Both self-insured and fully insured plans must comply with HIPPA nondiscrimination rules, which prohibit discriminating against individuals based on health factors.

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