Employers offering health and welfare benefits must ensure their plan designs and cost structures comply with various federal nondiscrimination requirements. Unlike retirement plans, nondiscrimination rules for health plans can be complex and subject to different interpretations.
Key laws that prohibit employment-based discrimination in health benefits include Title VII of the Civil Rights Act, the Genetic Information Nondiscrimination Act (GINA), the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA). These laws prevent discrimination based on race, sex, pregnancy, genetic information, disability, and age.
The Health Insurance Portability and Accountability Act (HIPAA) prohibits discrimination based on health status factors like medical history or disability, ensuring that premiums or contributions cannot be unfairly adjusted for individuals with different health conditions.
Specific nondiscrimination rules also apply under Internal Revenue Code Sections 125 and 105(h). Section 125 governs cafeteria plans, requiring eligibility and benefit testing to ensure highly compensated individuals do not receive disproportionate tax advantages. Section 105(h) applies to self-funded plans, with tests focused on fair eligibility and benefits for highly compensated employees.
These rules include complex tests comparing participation and benefit levels between highly compensated and other employees, with consequences including loss of tax-favored status if a plan fails to comply.
Employers should also be aware of additional nondiscrimination requirements for dependent care accounts, health savings accounts, and group term life insurance.
For a detailed look at these important compliance topics, read the original article here: Benefitting You – August 2025
