338 / When does a self-insured health plan discriminate with respect to eligibility to participate?

(1) 70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan; or

(2) Employees who qualify under a classification set up by the employer and found by the IRS not to be discriminatory in favor of highly compensated individuals.¹

Excludable Employees

For purposes of these eligibility requirements, an employer may exclude from consideration those employees who:

(1) Have not completed three years of service at the beginning of the plan year; years of service during which an individual was ineligible under (2), (3), (4), or (5) below must be counted for this purpose;

(2) Have not attained age 25 at the beginning of the plan year;

(3) Are part-time or seasonal employees;

(4) Are covered by a collective bargaining agreement if health benefits were the subject of good faith bargaining; or

(5) Are nonresident aliens with no U.S.-source earned income.²