Health Plan Eligibility: Do’s and Don’ts

Employers sponsoring group health plans have some flexibility when deciding which groups of employees and dependents will be eligible for coverage. However, there are several crucial eligibility requirements employers should adhere to for health coverage. These rules can be categorized into important eligibility “do’s” and “don’ts” for employers to follow.
A basic eligibility “do” is following the terms of the health plan’s written plan document, including its eligibility rules. Also, to avoid potential penalties, applicable large employers (ALEs) should ensure they offer affordable coverage to their full-time employees. Other important “do’s” include making coverage available for adult children up to age 26 and continuing to offer coverage for Medicare-eligible employees when the health plan is the primary payer.
Essential “don’ts” for health plan eligibility include offering coverage to nonemployees, such as independent contractors, and imposing waiting periods that exceed 90 days. Other crucial “don’ts” are overlooking applicable nondiscrimination requirements when establishing eligibility rules and excluding employees from coverage based on health status-related factors.

Eligibility Do’s

Do Follow the Terms of the Plan Document

To comply with ERISA, a health plan must have an official written plan document that contains the plan’s rules for benefits and eligibility. These rules should identify the groups of employees and dependents (e.g., children, spouses and domestic partners) who are eligible to enroll in the plan. The plan document should also describe any waiting period or other conditions for enrollment. The plan document is often comprised of multiple documents, including benefit descriptions provided by an insurance carrier or third-party administrator, and a “wrap” document that combines multiple benefits under one welfare benefit plan and satisfies ERISA’s documentation requirements.
Following the written plan document in the day-to-day operations of the plan is a fiduciary duty under ERISA. Employers should be familiar with their written plan document and periodically review the document to make sure it remains current. Deviating from the health plan’s established eligibility rules may also raise concerns about impermissible discrimination or favoritism in the workplace. For insured health plans, going beyond the plan’s established eligibility terms may inadvertently create self-insured liability for the employer if the carrier denies claims based on the individual’s ineligibility for benefits.

Do Offer Affordable Coverage to Full-time Employees (ALEs Only)

The Affordable Care Act (ACA) requires ALEs to offer affordable, minimum-value health coverage to their full-time employees (and dependents) or potentially pay a penalty to the IRS. This employer mandate is also known as the “pay-or-play” rules. ALEs are employers that had, on average, at least 50 full-time employees, including full-time equivalent employees (FTEs), during the preceding calendar year. Small employers that are not ALEs are not subject to these rules and are not required to offer coverage to their full-time employees.
An ALE may be subject to a pay-or-play penalty if at least one full-time employee receives a premium tax credit for purchasing individual health coverage through an ACA Exchange (or Marketplace) and the ALE:
  • Did not offer health plan coverage to at least 95% of full-time employees and their dependents;
  • Offered health plan coverage to at least 95% of full-time employees but not to the specific full-time employee receiving the credit; or
  • Offered health plan coverage to full-time employees that was unaffordable or did not provide minimum value.
Identifying which employees are full-time employees is central to the ACA’s pay-or-play rules. A full-time employee is an employee who has, on average, at least 30 hours of service per week or at least 130 hours per calendar month.

Do Offer Coverage for Adult Children up to Age 26

The ACA requires health plans that provide dependent coverage for children to make the coverage available for adult children until they reach age 26. A “child” includes an employee’s biological child, adopted child, stepchild or foster child. A health plan may not deny or restrict coverage for a child who is under age 26 based on whether the child is financially dependent on the participant, resides with the employee or with any other person, is a student, is employed, is unmarried, or any combination of these factors.
In addition, the terms of the plan providing dependent coverage of children, including premiums charged, cannot vary based on age (except for children who are age 26 or older). This means that adult children must be offered all the benefit packages available to other plan participants and cannot be required to pay more for coverage.

Do Continue to Cover Medicare-eligible Employees

When individuals have Medicare coverage and employer-sponsored health coverage, each type of coverage is called a “payer.” Medicare’s coordination of benefits rules decide which payer pays first on a health care claim (that is, pays primary). For example, health plans sponsored by employers with 20 or more employees are typically the primary payers for individuals who are entitled to Medicare due to age.
The Medicare Secondary Payer (MSP) rules include requirements for employers that sponsor group health plans that are primary to Medicare. These requirements are intended to protect Medicare’s secondary payer status. Employers with group health plans that are primary to Medicare must comply with the following requirements:
  • The group health plan must provide a current employee (or a current employee’s spouse) who is age 65 or older with the same benefits under the same conditions it provides employees and spouses under age 65;
  • The employer cannot offer Medicare beneficiaries any financial or other benefits as incentives not to enroll (or terminate enrollment) in a group health plan; and
  • The group health plan cannot consider the Medicare entitlement of an individual.
Thus, when an employer’s group health plan is the primary payer, Medicare-eligible employees and spouses cannot be excluded from plan coverage or discouraged from enrolling in coverage. Also, employers cannot offer any financial or other incentive for an individual entitled to Medicare to not enroll (or terminate enrollment) in a group health plan that would pay primary.

Eligibility Don’ts

Don’t Offer Coverage to Nonemployees

In general, employers should only offer health plan coverage to individuals who are their employees. Offering health coverage to nonemployees, such as independent contractors or directors, may inadvertently create a multiple employer welfare arrangement (MEWA). A MEWA is an arrangement that offers welfare benefits to employees of two or more employers that are not under common control or part of the same controlled group. Many states strictly regulate self-insured MEWAs, making these arrangements difficult to operate and administer. For example, to protect consumers from abusive MEWA practices, states may prohibit self-insured MEWAs from operating altogether or impose insurance carrier funding and reporting requirements on these arrangements. Depending on the state, operating an unlicensed MEWA can expose an employer to civil and criminal penalties.
In addition, offering health coverage to independent contractors may undermine an employer’s classification of these workers as nonemployees. Because independent contractors are typically ineligible for employee benefits, offering health plan coverage to independent contractors may indicate that these workers have been misclassified. Misclassifying workers can have serious financial and legal consequences for an employer, such as liability for unpaid wages and employment taxes as well as penalties and fines.

Don’t Impose a Waiting Period Exceeding 90 Days

The ACA prohibits group health plans from applying any waiting period that exceeds 90 days. A waiting period is the period that must pass before coverage becomes effective for an individual who is otherwise eligible to enroll under the terms of the group health plan. All calendar days are counted beginning on the enrollment date, including weekends and holidays.
Other eligibility conditions that are not based solely on the lapse of time are generally allowed, such as being in an eligible job classification. In addition, employers may impose a requirement to successfully complete a reasonable and bona fide employment-based orientation period as a condition for eligibility for coverage under a plan. During an orientation period, an employer and employee can evaluate whether the employment situation is satisfactory for each party, and standard orientation and training processes can begin. However, any permitted orientation period may not exceed one month.

Don’t Exclude Employees Based on Health Factors

The Health Insurance Portability and Accountability Act (HIPAA) prohibits group health plans from discriminating against individuals regarding eligibility, premiums or coverage based upon a health status-related factor. Health status-related factors include an individual’s health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability and disability. Group health plans may not discriminate with respect to eligibility between similarly situated employees based upon a health factor. Eligibility rules include those related to enrollment, the effective date of coverage and eligibility for benefit packages. In addition, under HIPAA, employers cannot:
  • Require an individual to pass a physical examination to be eligible to enroll in health plan coverage;
  • Exclude individuals from coverage because they participate in dangerous activities or have high health claims;
  • Delay enrollment in the health plan until an employee is actively at work (unless individuals who are absent from work due to any health factor are treated as if they are actively at work).
  • Charge an individual within a group of similarly situated individuals a different premium rate based upon that individual’s health factors; nor

Don’t Overlook Nondiscrimination Requirements

Federal tax law imposes nondiscrimination requirements on certain types of employee benefits to ensure employers do not impermissibly favor their highly compensated employees. These rules currently apply to self-insured health plans and arrangements that allow employees to pay their premiums on a pre-tax basis, or Section 125 cafeteria plans. The nondiscrimination requirements for fully insured health plans have been delayed indefinitely.
In general, a health plan will not have problems passing any applicable nondiscrimination test when the employer treats all its employees the same for purposes of health plan coverage (for example, all employees are eligible for the health plan, and the plan’s eligibility rules and benefits are the same for all employees). However, treating employees differently may make it more difficult for a health plan to pass the applicable nondiscrimination tests. The following are examples of plan designs that may cause problems with nondiscrimination testing:
  • Only certain groups of employees are eligible to participate in the health plan (for example, only salaried or management employees);
  • The health plan has different employment requirements for plan eligibility (for example, waiting periods and entry dates) for different employee groups; and
  • The employer maintains separate health plans for different groups of employees.
Before implementing one or more of these plan designs, employers should confirm that the arrangement will comply with applicable rules prohibiting discrimination in favor of highly compensated employees. If a self-insured health plan or cafeteria plan is discriminatory, highly compensated employees will lose certain tax benefits under the plan.


Visit our Employee Benefits webpage to learn more about our employee benefits services, and be sure to contact us with any questions. And remember to like us on Facebook and follow us on LinkedIn to stay up-to-date on industry news and tips!

The following resources may also be of assistance:

  • Final rules on the ACA’s age 26 requirement for young adults
  • Final rules on HIPAA’s nondiscrimination rules related to health status-related factors

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.


EEOC Announces EEO-1 Portal for 2023 Workforce Data Will Open April 30

On Feb. 26, 2024, the U.S. Equal Employment Opportunity Commission (EEOC) announced that the portal for private sector employers to submit equal employment opportunity workforce data (EEO-1 Reports) from 2023 will open on April 30, 2024, and that the deadline to file is June 4, 2024.
Under Title VII of the Civil Rights Act (Title VII), certain employers must usually submit an EEO-1 Report by March 31 each year. This data collection has been delayed in the past several years due to COVID-19 and various other factors.

EEO-1 Reporting Background

The EEO-1 Report is a federally mandated survey that requires certain employers to submit workforce data categorized by race or ethnicity, gender and job categories. The EEOC uses the collected data for several purposes, including enforcing Title VII’s prohibitions against employment discrimination and researching employment patterns.

Employers Subject to EEO-1 Reporting

The following entities are subject to EEO-1 reporting:
  • Private employers that have 100 or more employees (with limited exceptions for schools and other organizations);
  • Private employers with between 15 and 99 employees, if they are part of a group of employers that legally constitutes a single enterprise that employs a total of 100 or more employees; and
  • Federal contractors that have 50 or more employees; are either prime contractors or first-tier subcontractors; and have a contract, subcontract or purchase order amounting to $50,000 or more.
Employers filing EEO-1 Reports for the first time must register to log in and receive a password and further instructions for filing from the EEOC. Although the EEOC sends notification letters to employers it knows to be subject to EEO-1 requirements, all covered employers are responsible for obtaining and submitting the necessary information prior to the appropriate deadline.
An employer that fails or refuses to file an EEO-1 Report as required may be compelled to do so by a federal District Court.

Employer Action Items

Employers subject to EEO-1 reporting requirements should begin gathering 2023 EEO-1 data and making plans to ensure they will be ready to complete their reports by June 4, 2024. Covered employers should also review and monitor the EEOC home page and website dedicated to EEO data collection for additional information.

As a reminder, you can download our 2024 HR Compliance Calendar here to help keep track of important HR dates and deadlines. Contact us today for more HR guidance. And be sure to like us on Facebook and follow us on LinkedIn for more news and industry tips.

This blog post is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

Employee Benefits

15 Low- and No-cost Employee Benefits to Offer

Employee benefits are the cornerstone of a thriving organization. Perks and benefits are pivotal in enhancing job satisfaction, attraction and retention rates, employee well-being and overall workplace morale. While some organizations may feel constrained by budget limitations, there are numerous low- and no-cost benefits that can significantly impact employee happiness and productivity.
This blog post highlights 15 budget-friendly employee benefits.

Affordable Benefits That Employees Want

Many of today’s most popular benefits come at little to no cost for employers. As the race for talent remains tight, employers may consider offering the following affordable employee benefits to appeal to workers:
  1. Flexible work arrangements—Many of today’s workers desire flexible work hours or the option to work remotely. This flexibility can greatly improve work-life balance and reduce stress levels. Remember that flexible work arrangements require clear policies and communication to ensure accountability and consistency among workers.
  2. Flexible vacation policies—Instead of rigid vacation accrual systems, more employers are implementing unlimited or flexible vacation policies. Trusting employees to manage their time off can lead to greater autonomy and responsibility and help reduce burnout. However, flexible policies require trust and accountability from employees and may entail additional coordination to manage leave schedules.
  3. Wellness programs—Popular wellness initiatives include yoga classes, meditation sessions or health challenges. Promoting physical and mental well-being can lead to healthier, happier employees. Wellness programs are trending as a way to foster positive company culture, but it’s important to keep in mind that they often require commitment and resources for planning and implementation.
  4. Family-friendly policies—The path to and journey of parenthood are unique. Employers can offer attractive family-friendly policies, such as parental leave, flexible child care arrangements, generous nursing breaks or assistance with adoption expenses. Supporting employees in their family responsibilities can improve loyalty and morale.
  5. Professional development opportunities—Today’s workers value learning and development programs for their career growth. Investing in employee professional growth opportunities, such as online courses, workshops or conferences, demonstrates a commitment to their long-term success.
  6. Employee recognition programs—Emotional salary, which comprises nonmonetary components contributing to an employee feeling adequately rewarded at work, contributes to higher levels of job satisfaction. Frequent recognition is one such factor of emotional salary that can help keep workers happy. When employees feel valued, recognized and appreciated for their contributions, they are more likely to enjoy their work and find it fulfilling. Therefore, employers can establish a system for publicly acknowledging and rewarding outstanding performance. Recognition doesn’t always have to come with a monetary reward; a simple “thank you” can go a long way.
  7. Employee assistance programs (EAPs)—These programs can help employees save on health care expenses, provide tax benefits and promote financial wellness. While such programs require administrative setup, the payoff can be worth it, as EAPs provide confidential support for employees dealing with personal or work-related issues.
  8. Flexible spending accounts (FSAs) or health savings accounts (HSAs)—Even if an organization can’t afford to provide comprehensive health care benefits, offering FSAs or HSAs allows employees to set aside pre-tax dollars for medical expenses, which may reduce their financial burden.
  9. Financial education workshops—More workers want guidance to increase their financial literacy. To meet this desire, employers can provide resources or workshops on personal finance management, budgeting and retirement planning. Empowering employees with financial literacy can alleviate stress and improve overall well-being.
  10. Mentorship programs—Mentorship can facilitate knowledge transfer, boost career development and employee engagement, and strengthen the company’s talent pipeline. By offering mentoring resources or pairing junior employees with experienced mentors within the organization, a company can foster professional growth, skill development and a sense of belonging. A mentorship program can easily be scaled based on employees, roles and organization.
  11. Paid volunteer time—Employers can encourage community engagement by granting paid time off for employees to volunteer with charitable organizations. Giving back to the community fosters a sense of purpose and fulfillment and may even enhance team bonding.
  12. Casual dress code—Relaxing the dress code policy can make employees feel more comfortable and increase morale. This option could entail casual Fridays or more lax requirements during summer. The dress code policy should be clearly defined to avoid confusion.
  13. Summer hours—To help boost employee morale and satisfaction during the summer months, employers can offer summer hours, such as closing an hour or two early on Fridays. This perk demonstrates flexibility and trust from the employer and can ultimately help improve employees’ work-life balance during vacation season.
  14. Employee discount programs—Employers can offer discounts that appeal to workers’ interests and needs. This perk allows employees to save money on their everyday purchases, which can improve their financial literacy and boost company loyalty. Keep in mind that exclusive discounts hinge on partnerships and negotiation, and they may not be equally beneficial to all employees, depending on their interests and preferences.
  15. Health and wellness resources—It may be beneficial to provide access to resources such as mental health hotlines, virtual counseling sessions, or fitness and meditation apps. Prioritizing employee well-being sends a clear message that their health is valued.


Offering employee benefits doesn’t have to come with a hefty price tag. These low- or no-cost benefits that workers value can enable employers to create a supportive and fulfilling work environment that, in turn, attracts and retains top talent. Investing in employee satisfaction not only boosts morale and productivity but also strengthens the overall success and reputation of the organization.

To learn more about our employee benefits services, visit our Employee Benefits webpage. And be sure to like us on Facebook and follow us on LinkedIn for more news and industry tips.