Can we cover the cost of several employee's Rx costs if they have chosen to take a medicare wrap instead of our group insurance. We would like to pay $60 toward their Rx costs. We don't have a Flex plan, but would still like to pay for it through company funds. Any ideas out there?

I am brainstorming, but i think you could set up a separate class for them under your group health plan and pay only for the RXs and have that be your only benefit. It will complicate things, but then you get out of any discrimation issues.

Possibly you could have it just be another employee benefit, also, kind of like tuition reimbursement. I would check with your attorney, because since to see what other issues you will have, SPDs, COBRA, etc.....

You either set up a special class under your existing MERP or set up one for the purpose.

Guidance can be found in IRS Chief Counsel Advice 200206053 which cites a number of Rev Rulings.