:confused: I'm a small business owner in Mississippi, and I wanted to offer Healthcare to some of my employees and I wanted to know the laws are on the kinds of restrictions I'm allowed to put on eligibility requirements. I can't afford to cover all my employees, and am more interested in covering only employees that have been with me two years are more. Can I put a 2 year employment restrictions on eligibility? Or can I put a class restriction, such as you must be in a management position, or both? Or just salary positions?
Yes to all.
You may restrict it to employees who have been there only two years; you may restrict it to only salaried, or only management positions.
It is perfectly legal to establish eligible classes of employees, as long as they do not violate Title VII or other related laws. You cannot offer it only to men, or only to white employees, for example. But you can set up non-discriminatory classes and offer it only to them. However, once you've established who is and isn't eligible, you MUST offer it to all eligible employees.
Start with IRS publication 15B, Fringe Benefits. Most of what you need to know you can find there. If we are talking employer provided health care only, then there are two types of "plans".
- Third Party Provider plans do not have non-discrimination requirements. That is another way of saying that nothing you have mentioned so far would be a problem with a 3rd party provider plan.
- Self Insured plans on the other hand do have non-discrimination requirements and require special handling for Highly Compensated Employees.
Something that is not obvious is that an employer provided health care "plan" under the IRC 104-106 rules does not actually have to be in writting, although it is a good idea to do so (helps provide formal limits). Especially since you are talking about having eligilbity restrictions on your plan.
MS is not a state commonly known for state imposed medical plan rules (at least by me), but I have been wrong before. Hopefully if MS has some rules that will affect you, another responder will say so.
There is one more complication, although this is a mostly good complication. If you want to have the employee deductions for premiums handled on a pre-tax basis, you need to purchase something called a Premium Only Plan (POP) for around $100. It is quite possible for an employee medical plan to have deductions that are not pre-tax. The orginal IRC 104-106 rules did not allow for this and it is only the more recent IRC 125 rules that created this option (say 20 years ago). A canned POP plan like I said only costs $100, reduces not just employee taxes, but employer taxes and tends to have a very fast pay back period. Generally speaking, it would be the best $100 you ever spent.
However!!! The Section 125 rules are changing big time in 2009. Make sure that any plan you purchase is compliant with the 2009 rules.
