Moderated by Ric Joyner, MBA, CEBS, GBA, CFCI
Agent Question: We have a Hotel chain who, as most do, have many employees who work less than 40 hours a week and currently they have a Plan for Highly compensated.
The general questions are as follows.
- Which guideline should be followed when determining if an employee meets eligibility based on hours worked a week, state or federal
Reinhart Attorney Answer
Any state mandates as to minimum hours for eligibility will be reflected in the insurance policy. Individuals who fall within the eligibility stated in the policy will be eligible. State mandates do not apply for self insured plans unless they are provided by a non-ERISA employer such as a government entity or church that has not elected into ERISA.
Federal law is impacted relating to the discrimination testing under 105(h). In particular, 105(h)(3)(B)(iii) permits exclusion of part-time and seasonal employees from the test. The regulations define the parameters of who is considered part time for purposes of this exclusion.
Finally, the new pay-or-play guidelines in the federal health care reform will impose a back-door 30 hour mandate that will come into play in 2014.
Within those parameters an employer is free to determine who is eligible for the plan and not – and the plan will control.
Agent Follow up Question
- Do the grandfather guidelines apply to fully insured, self funded or both
Attorney Follow Question
- If the customer wants to keep his current plan for highly compensated are there any other issues they need to consider
I am assuming that the "highly compensated" plan is an insured medical plan that operated by virtue of the former exclusion from discrimination testing under 105(h) for insured plans. That exclusion is removed under health care reform except for grandfathered plans. (Effective after September 23, 2010.) Assuming I have the facts correct, the employer will need to keep in mind that a plan only for highly compensated employees (or tiered to benefit highly compensated employees) will not work if it loses grandfathering unless it can pass the 105(h) test. A plan only for highly compensated employees will not pass. If they want to keep the plan, they will need to understand the parameters of the grandfather rules and not do anything to the plan that would cause a loss of grandfathering. For example, changing insurance policies or carriers will cause a loss of grandfathering.
This particular issue, highly compensated plans, eligibility and whether it applied to fully insured or Self funded appears to be the main topic concerning out clients. If you have a review or summary that addresses this topic we would be most appreciative.
Self funded plans have always been subject to the 105(h) rules. Now insured plans will be subject unless they are grandfathered (in existence as of March 23, 2010 and not changed in a way that would cause loss of grandfathering under the regulations). A highly compensated only plan does not work under those rules. Here is a link to our explanation of the grandfather rules:
Here is a link to two summaries of the 2010- 2011 changes: