Section 125 Plan Election Change Matrix

Transcription

1 This diagram represents NEO Administration's interpretation of the current Section 125 regulations regarding election changes. By plan design, plan sponsors may elect to impose more restrictive rules, or seek other guidance or interpretation of the rules. This chart assumes the plan defines "change in status" by the definition in Treasury Reg Also, the change in cost or coverage provisions are based on current proposed regulations, and it is possible the IRS may apply a more (or less) restrictive interpretation to these provisions. Note that even if a change may be permitted under the Section 125 rules, some of the underlying plan documents and/or insurance contracts may not allow the change in coverage outside of open enrollment. Please note that with ALL election changes, the requested election change must be consistent with, and on account of, the status change event. May Elections Be Changed In This Event? 1) Change in Status Events A. Change in Employee's Legal Marital Status (i.e.; Marriage, Divorce, Death of Spouse) with event is allowed B. Gain or Lose Dependent (i.e.; Birth, Adoption, Death) with event is allowed C. Change in Employment Status of Employee, Spouse, or Dependent Where Eligibility is Affected. C(1)(a) Commencement of Employment by Employee or Other Change in Employment Status (e.g., Part-Time to Full-Time, Hourly to Salary, etc.) Affecting Eligibility for a Benefit. elect insurance coverage, consistent with gaining eligibility for coverage because of the event elect to participate, consistent with gaining eligibility for coverage because of the event with gaining or losing eligibility for coverage or eligibility of dependent care expenses is allowed. C(1)(b) Commencement of Employment by Spouse or Dependent or Other Change in Employment Status (e.g., Part-Time to Full-Time, Hourly to Salary, etc.) Affecting Eligibility for a Benefit. revoke or elect coverage to add or remove spouse or dependent's coverage if coverage gained or lost under other employer's plan. make or increase election if spouse did not previously work. Employee may decrease election if dependent care coverage is gained through other employer's plan.

2 D. Termination of Employment by Employee, Spouse, or Dependent (or Other Change in Employment Status) That Causes Loss of Eligibility D(1)(a) Termination of Employee's Employment, or Other Change in Employment Status (Strike, Unpaid Leave, etc.) Which Causes Loss of Eligibility. Coverage terminates unless continued under COBRA * Coverage terminates unless continued under COBRA * Coverage terminates, although employee may continue to submit claims incurred within plan year until funding is exhausted. D(1)(b) Termination and Rehire Within 30 Days Elections that were in effect upon termination must be reinstated unless another event that allows a change has occurred. Or, employer may prohibit participation until the next plan year.* Elections that were in effect upon termination must be reinstated unless another event that allows a change has occurred. Or, employer may prohibit participation until the next plan year.* Elections that were in effect upon termination must be reinstated unless another event that allows a change has occurred. Or, employer may prohibit participation until the next plan year. D(1)(c) Termination and Rehire After 30 Days * make new elections make new elections make new elections D(2) Termination of Spouse's or Dependent's Employment (or Other Change in Employment Status That Results in Loss of Eligibility) YES. Employee make elect insurance coverage because of loss of eligibility under spouse or dependent's plan. enroll or increase election due to loss of eligibility under other employer's plan prior election consistent with event and loss of spouse's or dependent's eligibility for coverage or dependent care expenses becoming ineligible. E. Dependent Satisfies or Ceases to Satisfy Eligibility Requirements Under Employer's Plan (Marital Status Changes, Attaining a Specific Age, Student Status, etc.) add or drop coverage for dependent consistent with event election to account for expenses of affected dependent election to account for expenses of affected dependent F. Change in Place of Residence of the Employee, Spouse or Dependent YES. Change is allowed consistent with gaining or losing eligibility for coverage No change allowed, even if underlying health insurance coverage has changed YES, but only if move causes change in provider, cost or coverage * D(1)(a) & D(1)(b) There is coverage during the period of unemployment, unless continued under COBRA.

3 2) Cost or Coverage Changes A. Automatic Small Cost Changes in Group Plan Provided by Employer YES. Plan may automatically elected contributions as long as terms of plan require corresponding changes N/A B. Significant Cost Increase or Decrease increase election or revoke and elect coverage under another package providing similar coverage YES. Except no change allowed if cost increase is imposed by a provider who is a relative of the employee. C. Significant Coverage Curtailment revoke elections and elect coverage under another package providing similar coverage YES. (e.g., day care provider changes hours, extent of care, etc, causing employee to seek alternative dependent care provider) D. Addition or Elimination of New Benefit Package Option elect new or different option available under employer's plan. YES. Applies even if the change is a result of the employee changing daycare providers of their own volition. E. Change in Coverage Under Spouse's or Dependent's Employer's Plan E(1) Other Employer's Plan Increases Coverage decrease or revoke election if spouse or dependent actually elected increased coverage under their employer's plan. decrease or revoke election if spouse or dependent actually elected increased coverage under their employer's plan. E(2) Other Employer's Plan Decreases or Ends Coverage enroll or increase election if spouse or dependent actually elected or received decreased coverage under their employer's plan. increase election if spouse or dependent actually elected or received decreased coverage under their employer's plan. E(3) Open Enrollment Under Spouse's or Dependent's Employer's Plan with elections made under other employer's plan is allowed. with elections made under other employer's plan is allowed.

4 F. Miscellaneous Events Allowing Changes in Elections F(1) Begin FMLA Leave YES. Employee make revoke original election and elect different coverage as provided under FMLA YES. Employee make revoke original election and elect different coverage as provided under FMLA YES. Employee make revoke original election and elect different coverage as provided under FMLA F(2) Return From FMLA Leave make an new election if had terminated coverage while on FMLA leave make an new election if had terminated coverage while on FMLA leave make an new election if had terminated coverage while on FMLA leave G(1) HIPAA Special Enrollment For Loss of Coverage elect coverage for employee, spouse or dependent who has lost coverage. Change permitted only if Health FSA is subject to HIPAA (not usually the case) G(2) HIPAA Special Enrollment For Acquisition of New Dependent By Birth, Marriage or Adoption elect coverage for employee, spouse or dependent. Change permitted only if Health FSA is subject to HIPAA (not usually the case) COBRA Events increase pretax premium deduction to pay for coverage if a COBRA event (such as a loss of eligibility for health coverage for a dependent or reduction in hours that makes him ineligible for the employer's paid coverage) occurs. H(1) Court Order Requiring Coverage for Child Under Employee's Plan change election to include coverage for the child change election to include coverage for the child H(2) Court Order Requiring Spouse or Other Individual to Provide Coverage for Child change election to cancel coverage for the child change election to cancel coverage for the child

5 I. Employee, Spouse or Dependent Enrolled in Employee's Plan Becomes Entitled To or Loses Eligibility for Medicare or Medicaid commence, increase, reduce, or cancel coverage as applicable Health FSA election as applicable J. Mistakes Based on informal remarks made by the IRS, a change in election would be allowed if the employer has made an administrative mistake or there is clear and convincing evidence that the participant could not possibly use the benefit during the year. Example: An employee with no qualifying child care expenses elects Dependent Care coverage thinking it was to cover his dependent's medical expenses. Participant Doesn't Pass Medical Underwriting Also based on informal IRS remarks, it is "probably permissible" to let the employee out of his election.