In a noncontributory plan, when the premium is paid by the sponsor (employer), what percentage of eligible employees must participate in the plan?

In a noncontributory plan, the employer bears the entire cost of the premiums, meaning employees do not have to contribute financially to participate in the coverage. In such plans, a crucial requirement is that 100% of eligible employees must participate to ensure that the risk is spread across the entire employee group. This is important because it helps maintain the plan’s viability and affordability by ensuring a larger risk pool. It also prevents adverse selection, where only individuals likely to need benefits would enroll while others could opt-out, potentially driving costs up for everyone involved. Therefore, the requirement for full participation ensures the financial sustainability of the noncontributory benefit provided by the employer.