When Both Spouses Work for the Same Employer

By: HUB’s EB Compliance Team

Spouses in a household sometimes work for the same employer — a situation commonly found across hospitals, universities, government contractors, large corporations and family-owned businesses. While this arrangement raises concerns across many benefit programs, medical plan administration presents some of the most nuanced issues. This article examines the key medical plan considerations employers and plan sponsors must address when both spouses work for the same employer.

Plan eligibility

When both spouses are employed by the same organization and benefit-eligible, each is independently eligible to enroll in the group health plan as an employee. This is the foundational enrollment structure and the most straightforward scenario — each spouse enrolls in their own coverage, whether self-only or a tier that includes any dependent children.

Dual coverage

A more complex question is whether the plan allows for dual coverage under the plan. For example, does the plan allow for both Spouse A and Spouse B to enroll in employee plus spouse coverage? This can likewise arise with dependent children, where both spouses may enroll in family coverage, along with any dependent children.

The relevant rules do not prohibit dual coverage; however, whether this is allowed by a specific plan depends on the plan document. Some plan documents expressly limit or prohibit dual coverage under the plan; other plan documents allow it. Prohibiting dual enrollment is a design choice that reduces administrative complexity and potential coordination of benefits (COB) issues. Employers should confirm their plan document reflects an intentional, clearly articulated position on this question, in order to avoid any gaps or ambiguities.

Rate adjustments

Under the Affordable Care Act (ACA), an applicable large employer is generally required to offer at least one health plan that provides affordable, minimum value coverage to its full-time employees (and minimum essential coverage to their dependents) or pay a penalty.

Affordability is based on the lowest-cost offer of minimum-value employee-only coverage. Because of this, many employers contribute significantly more to the employee-only tier of coverage than to tiers that include spouses and dependents. As an example, an employer may offer employee only coverage for $100 per month, while employee-plus spousal coverage under the same plan may cost $300 per month.

This presents a dilemma when spouses work for the same employer. Using the example above, Spouse A and Spouse B could both enroll in employee only coverage for a combined cost of $200 per month. If they were to enroll in employee-plus spouse coverage, their monthly cost would rise to $300. The tradeoff is that by enrolling in employee-plus spouse coverage, they would have the benefit of a single, combined deductible and out-of-pocket maximums as opposed to individual deductibles and out-of-pocket maximums.

For employers, this dilemma may lead to questions of whether the spouses could both receive the employer contribution towards the employee only tier, while enrolling in employee-plus spouse coverage. Continuing with the facts from above, Spouse A could enroll in employee-plus spouse coverage at a monthly cost of $200 since their spouse works for the same employer.

Nondiscrimination concerns

Employers who provide greater contributions to employees whose spouses work for the same employer risk conflict with the nondiscrimination rules under Internal Revenue Code §105(h) (applicable to self-insured plans), and Internal Revenue Code §125 (applicable to coverages included in the employer’s cafeteria plan). These rules are designed to prevent employers from favoring highly compensated employees.

These nondiscrimination rules are potentially implicated if one or both spouses working for the same employer are deemed to be highly compensated, and the employer provides greater contribution to employees when both spouses are employed. Charging employees the same amount for coverage, without regard for whether the spouse works for the same employer, can avoid implicating these rules.

Employee morale

Employers may also want to avoid providing greater contributions when both spouses are employed in order to avoid negatively impacting employee morale. For example, if employees whose spouses work for the same employer receive greater contributions versus those whose spouses do not work for that employer, it may be perceived as unfair by employees who do not benefit from this policy. This issue is completely separate from any potential nondiscrimination concerns.

Conclusion

Employers who employ same-household spouses should be aware of the issues discussed here, especially if they aren’t already. Likewise, even employers who do not currently employ same-household spouses should be aware of these issues, in the event they employ spouses in the future.

If you have any questions, please contact your HUB advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on HUB International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect, and HUB International does not have an obligation to update this information. You should consult an attorney, accountant or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.