When employees own the company, the health plan is part of the ownership story.
Employee-owned companies run the same group health rules as any other employer. What changes is the audience: owners who read the benefit statement as shareholders, and a company whose tax and nondiscrimination tests may depend on who owns the stock.
The ACA, ERISA and COBRA don’t care who owns the shares.
An ESOP is a retirement vehicle. Your group health plan is a separate plan with its own rules.
The Group Health Plan
Eligibility, waiting periods, notices, filings, COBRA and the ACA employer rules apply on the same terms. Ownership through an ESOP does not create an exemption.
A Separate Plan
The ESOP and its trustee sit outside the health plan and outside what we advise on. We work alongside your ESOP advisers and counsel and keep the health plan documents consistent with what they provide.
Everyday Plan Work
Carrier choice, funding, contributions, open enrollment and renewals are decided the same way as any employer of your size.
Several benefit tests turn on who owns what.
Which employees count as owners, and in what share, affects how some rules apply. Your counsel should say how ESOP-held shares are treated before you rely on any of them.
Highly Compensated Employees
The definition of a highly compensated employee includes more-than-five-percent owners, and it feeds nondiscrimination tests for cafeteria plans, dependent care programs and self-insured plans.
Educational Assistance
Section 127 limits the share of benefits that can go to owners of more than five percent of the company, which matters if you offer tuition or student loan help.
Owner-Employees
Owners who are also employees can raise questions about how their coverage is taxed. Get an answer from your tax adviser before the plan year starts.
Section 105(h) nondiscrimination → Student loan repayment benefits →
Employee-owners notice benefits differently.
When people own part of the company, they tend to ask why the plan costs what it does.
Explain the Cost
A plain explanation of what the company spends and where renewal increases come from builds trust, and helps employees choose plans they understand.
Total Rewards
Many employee-owned companies present pay, health benefits and ownership in one statement. We help with the health benefit side of that picture.
Retention
Health benefits that employees actually use support the long tenure ownership plans depend on.
What employee-owned companies ask about health benefits.
Does an ESOP change our health plan?
No. The ESOP is a separate plan. Your group health plan follows the same rules as any employer of your size.
Do employee-owners get special treatment in the plan?
Not automatically. Eligibility and contributions should follow the plan document and the nondiscrimination rules, not ownership.
Who answers ESOP questions?
Your ESOP trustee, administrator and counsel. We stay in our lane on the health and welfare side.
Related guides.
Benefits in Mergers and Acquisitions
What happens to plans when ownership changes.
Retention Messaging
Helping employees see what their benefits are worth.
Section 105(h) Nondiscrimination
Testing for self-insured health plans.
Tell us how your ownership is set up.
We’ll tell you which health plan rules your structure may touch, what to ask your counsel, and how to explain the plan to employee-owners. No cost, and no obligation.
Your carrier and funding type
Whether the company is an S or C corporation
Your ESOP adviser
Your last renewal
Rough answers are fine. We build the numbers from there.
Laws and rules referenced
26 U.S.C. § 414(q) — Definition of highly compensated employee, including five percent owners.
26 U.S.C. § 127 — Educational assistance programs, including the five percent owner limit.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
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