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socrateaser, Lawyer
Category: California Employment Law
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My wife works for a large company listed on the stock exchange. My

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My wife works for a large company listed on the stock exchange.

My wife is represented by a union. She has health insurance premiums deducted from her paycheck which are paid into a trust fund maintained by the union for health benefits. Disbursement from the trust fund are controlled by trustees appointed by the union.

The management people of this company have a section 125 plan in place which gives pre-tax treatment to the health insurance deductions for the management employees.

The company refuses to give pre-tax treatment to the heath insurance deductions for the union employees (even though it would save both the company and the employees in payroll taxes and other costs).

The company says that it cannot offer pre-tax treatment for the health insurance deductions for the union employees because the company has no control over what the union does with the health insurance deductions once they are turned over to the union.

Is this legal?

It seems like this approach with regard to the union employees would be discriminatory under Section 125 of the Internal Revenue Code?
Submitted: 5 years ago.
Category: California Employment Law
Expert:  socrateaser replied 5 years ago.
IRC 125(g)(1) provides that "...a plan shall not be treated as discriminatory if the plan is maintained under an agreement which the Secretary finds to be a collective bargaining agreement between employee representatives and one or more employers."

Assuming that this plan was agreed to in contract negotiations with the union, then it would not be discriminatory under IRC 125.

You can contact the U.S. Dept. of Labor Employee Benefit Security Administration and ask for an investigation, if you believe that the plan is discirminatory.

Hope this helps.

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