Question concerning S Corp Discrimination Rules

[jschuhcpa]

Hello
I have researched this topic quite a bit and can't seem to find a definite answer.
My scenario is an S Corp who pays 100% of the shareholders/owners health insurance, while
pays around 50% of the employees health insurance. Health insurance is in a group plan, and the employees portion is coming out of their check pre tax (125 plan). Have they run afoul of the non-discrimination rules and are now subject to the $100 per day/employee penalty?
If so, for 2014 what could be done to correct this. I would think maybe treating part of the owners health insurance premium as a taxable wage in order to balance out between what was paid for the employees and now for the owners.
Thanks in advance for any help.

JS

[ATSMAN]

If the Group Insurance plan is subject to ERISA rules there may be some anti-discrimination regulations that could apply to prevent highly compensated employees (the owners) from getting more benefits or at a lower premium than the rank and file employees.

ERISA is a complicated set of laws so you will need to research it.

[TaxGuyBill]

I agree, ERISA probably has a problem with it, but I am clueless about ERISA rules.

Although the ACA does have anti-discrimination rules against Highly Compensated Employees, the IRS says they will NOT enforce it UNTIL some Regulations are written to clarify things (they have not come out with the Regulations yet).

http://www.law.cornell.edu/uscode/text/42/300gg-16

http://www.irs.gov/pub/irs-drop/n-11-01.pdf

[TXEA]

The amount paid for the shareholders should match the amount paid for the employees. There is likely discrimination here under the DOL rules and also possibly with state insurance laws. I am fairly certain that Texas requires the amount paid for all employees by the employer to be the same.

The lower amount paid for the rank and file employees discriminates possibly as to discouraging participation.

I do not know the answer to your question; however, I would recommend they remedy this situation by treating themselves as they treat the employees until we have guidance.

[ATSMAN]

Make the broker get some answers!

I am assuming they have a broker that sold them the group health insurance. Make him/her work for the commission by asking the question of their experts at the Home Office!

I routinely ask my broker questions and have him get the answer from the company's Home Office.

As you all know insurance companies have an army of lawyers!

[jschuhcpa]

Their Blue Cross Blue Shield group plan has been in effect for a number of years, so I would have thought the insurance company would have some guidance on this. I think I will have the client call the insurance agent