Charging Employees Different Premiums

Employers who are designing a health and welfare benefit plan for their employees often wonder about the rules relating to setting premiums for employees. Employers generally have significant flexibility in this part of their plan’s design. Common structures contemplated by employers include, but are not limited to:

  • Charging all employees a flat amount for their health plan
  • Charging employees a percentage of the premium for the health plan, with the percentage changing as employees move between tiers (self, self plus one, self plus family)
  • Giving employees a set dollar amount that they can use to offset the cost of whatever plan and plan tier they enroll in

Employers are also interested in setting different contribution structures for different groups of employees. Sometimes this is due to a geographic difference between employees, job types, staff versus management, and more. Employers may wish to give lower-paid employees more employer-provided money; sometimes employers wish to give managers or executive staff more employer-provided money.

Employers should be aware that there are different nondiscrimination requirements to consider.

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The information provided is for informational purposes only and does not constitute legal advice. The information above contains only a summary of the applicable legal provisions and does not purport to cover every aspect of any particular law, regulation or requirement. Depending on the specific facts of any situation, there may be additional or different requirements. This is to be used only as a guide and not as a definitive description of your compliance obligations.