I have a profit sharing plan that the employer is contributing to under the auspices of funding retiree medical. It is not a 401(h) type account. The money contributed for the employee is fully portable and vests (qualifies for rollover status).

Contributions to this retiree health insurance account are made based on length of service and marital status: married participants receive a higher contribution than single; longer service employees receive a greater contribution. Again, the money does not have to be spent on medical. If an employee leaves, the money can be paid by the employee to a VEBA that will provide the medical coverage.

The problem (aside from married EE getting more than single) is that if both married parties are covered under the plan (employees have married employees). In that instance, neither employee receives a marital contribution, instead both only receive a single contribution.

My questions are:

1. Since this is a qualified retirement plan, can an employer discriminate on contributions based on marital status?

2. Even if the employer can discriminate based on marital status, can it still refuse to make a full contribution (marital vs single) for employees who happen to be married to othe employees?

Any comments are appreciated.

Is the plan actually a VEBA? If so, you may get more responses in the VEBA section of this message board. The VEBA non-discrimination rules are a lot more complex/different from the non-discrimination rules that apply to regular profit sharing plans. You mentioned that it was a "qualified retirement plan". Has a determination letter been received from the IRS. If so, I would assume that the provisions you are referring to, eg, different contribution rates for married vs. single employees, would be contained in the plan document that was submitted to the IRS. If that's the case, then there may be less of a problem than first perceived.... Maybe others can address your questions as well.....