Anti-discrimination Laws and The Effect on Employee Benefit Packages

A balanced benefits package can attract and keep valued employees, but the cost of offering benefits can skyrocket if not monitored. In 2017, the Bureau of Labor estimated that the average cost of providing benefits for each employee is $11.38 per hour. However, costs for these packages ultimately depend on factors such as geography, industry, workforce size, health plans offered, and the overall health of the workforce.

Employers looking for savings might wonder whether they can save money by providing certain benefits only to certain employees. And, while there are situations when employers are able to offer specified benefits to certain employees, employers should have a good understanding of federal and state anti-discrimination laws or seek professional guidance. It is illegal for employers to discriminate against employees based on race, color, religion, sex (including gender identity, sexual orientation and pregnancy), national origin, age (40 or older), disability or genetic information.

There are no federal laws requiring that plans provide the same benefit coverage to all employees as long as benefit eligibility is based on tenure, work location, full- or part-time status, exempt/nonexempt status, job group or department.

In certain welfare plans, including self-insured medical and group term life insurance plans, taxable income is created for employees if they receive a disproportionate amount of tax-advantaged benefits. These situations could cause a company plan to fail the nondiscrimination test.

The Patient Protection and Affordable Care Act (PPACA) requires employers with 50 or more employees to either offer employees health care coverage or pay a fee. The law does not apply to part-time workers, except in determining if the employer has 50 or more “full-time equivalent” employees.

A plan also may be able to offer different benefits to employees, their spouses and their dependents. A plan also can make distinctions between the beneficiaries themselves if the distinction is not based on a health factor. However, under the PPACA, adult dependents must be covered to age 26. To avoid fees, employers must offer adult dependents the same level of coverage at the same price as currently offered to other similarly situated dependents.

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