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Legal to drop health insurance?

HRMMHRMM 20 Posts
in Benefits & Leave Vote Up0Vote Down
Hi...I handle hr for two companies... We recently had open enrollment eff. 8/1 for one of the companies. We only had 4 people stay on the plan and one dropped due to higher rates. The owner came in my office and asked me if it is legal to drop the policy. He wants to offer some type of allowance instead. Is this legal? Does anyone know? Appreciate any help!
Thanks,
MM
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Comments

  • 2 Comments sorted by Votes Date Added
  • Down_the_MiddleDown_the_Middle 771 Posts
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    In the absence of addt'l information I'll have to assume that your annual open enrollment permits eligible employees to opt in or out at their discretion. The employee who dropped coverage would be permitted to do so.
    Offering an allowance (in lieu of another benefit) is probably legal in TX, but is governed by IRS rules involving flexible compensation programs. I would recommend involving some specialized assistance-----benefits attorney; benefits broker, etc. They would be more familiar w/the legal issues you'd have to address to do this.
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  • marcmarc 3,126 Posts
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    Yes, it is legal to do so. The amounts paid are most likely taxable.

    You can adopt a benefit plan, such as a section 125 cafeteria plan, which can allow EEs to pay for health insurance with pre-tax dollars, but as Down the middle said, get the pros involved.
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