Consultant’s Corner: Fringe Benefits for Key Employees

Fringe Benefits for Key Employees

Q. Is it possible for companies to offer fringe benefits to some employees and not others? For example, can they give certain benefits to key executives and sales leaders and not to the rest of the company?

Fringe Benefit Programs

Generally speaking, it is possible for certain fringe benefit programs to vary by employee category—executive/non executive, management/staff, full-time/part-time, salary/hourly, union/non union, etc. One notable exception is employer-provided health insurance benefits, as discussed in greater detail below.

Also, executives and other employees can negotiate unique benefits and perquisites under certain circumstances; however, while employers generally can provide selected fringe benefits to executives, for example, in many cases those benefits will be considered taxable if the executives are highly compensated employees.

To design their benefit programs in a manner that avoids any discrimination and otherwise complies with federal and state labor laws and minimizes the tax consequences for employees, employers should always review any prospective fringe benefit programs (including any planned employee cost sharing), employee classifications, and personnel policies with a local lawyer and accountant or CPA.

Health Insurance Benefits

As to employer-provided health insurance benefits, when an employer offers health insurance benefits to its employees through a group health plan, which is common with small employers, the employer will need to offer the same health insurance benefits to all eligible employees under the plan.

Employers whose group health plans offer more lucrative benefits to select groups of employees (executives or sales employees for example) will be deemed discriminatory under the Affordable Care Act (ACA) or Obamacare. The ACA extended nondiscrimination rules for health insurance that originally applied to self-funded insurance plans, typically offered by large employers, to all health insurance plans.

Related Discussions

IRS Information on the Taxation of Employee Fringe Benefits:

Bill Wortman

Bill Wortman

Bill Wortman is the Chief Business Consultant for, with over 40 years of business experience. In addition to 12 years consulting small business owners, Bill’s professional career includes a big-eight CPA accounting firm, national consumer finance, big-three automotive manufacturing, Arby’s fast food, marketing, and other industries. He’s held multiple executive-level positions and fulfilled the role of CFO at large, publicly held (NYSE, NASDAQ, and AMEX) corporations. In addition, he’s been an owner of private ventures involving residential real estate development and a General Motors new car dealership.