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We've updated one of our most popular materials. See what's new in our guide to MERPs.

Defined Contribution Health Plan Requirements in Design

Design Requirements for Defined Contribution Health Plans

There are three key questions to ask when designing your Defined Contribution Health Plan. These three questions will help you customize a plan that achieves your employee health benefit goals (and meets your budget).

1. When will the plan year start?

Your company will decide when your Defined Contribution Health Plan will start.

2. What monthly allowance amounts will you provide?Design_requirements_defined_contribution_health_plan

You probably already have a budget in mind for health benefits. Within this budget, how will you divide up employees' monthly allowances?

You can provide the same monthly allowance amount to all employees, or you can provide different monthly allowances to different types of employees. This is also called employee classes. Classes must be based on bona-fide job criteria such as job title, location, etc. You can also vary the allowance amounts by family status (single, married, etc.) within an employee class.

For example, you could provide $300/month to Senior Programmers and $150/month to Administrative staff.

Following this example, you could add a layer of family status allowances. For the Senior Programmers you could provide $300/month to single participants, $350/month to married participants, and $400/month to married with children participants.

3. When are employees eligible for the plan?

What criteria makes employees eligible to participate in the Defined Contribution Health Plan? For example, do they need to work a certain amount of hours weekly, have a certain job title, or be employed for a certain number of days? (Note: the maximum waiting period is 90 days). These criteria will set employee eligibility for the Defined Contribution Health Plan.

Defined Contribution Plan Design Worksheets - Free Guide