The IRS has issued a new Notice that may help employees who would benefit by being covered for health insurance under an exchange rather than under their employer’s group health plan. Enrollment in an exchange plan is not available to those covered under an employer plan.
An employee’s elections in a Cafeteria Plan are generally irrevocable for a full Plan Year – usually the calendar year – unless there has been a change in his family or employment status. Election to pay premiums under a Cafeteria Plan is one of those elections. In the case of employment status, the change would have to result in a loss of coverage under the employer’s health plan.
Because of new ACA rules requiring large employers to provide coverage for all full-time employees, employees whose hours have been reduced below 30 may continue to be considered “full-time” (therefore, eligible) for the following 12 months. This would prevent them from revoking the Cafeteria Plan election and obtaining coverage – and perhaps subsidies – under an exchange. This Notice allows revocation in this circumstance provided the employee also enrolls for coverage under an exchange.
A second exception is provided for in the Notice. It allows a participant to stop his coverage under a group health plan mid-year and begin coverage under an exchange plan. The reason has to do with the annual open enrollment period under the exchanges. Because of the rules precluding revocation of coverage mid-year, an employee participating in a Cafeteria Plan that runs from, for example, July 1 to June 30, could only join an exchange with December open enrollment if he went without coverage from July 1 until December. This new rule allows him to drop the group plan in December and join an exchange with no break in coverage.
The Notice only allows a revocation of the election to be covered under the group health plan and to pay premiums in pre-tax dollars under the Cafeteria Plan. It does not allow revocation or change in the Cafeteria Plan’s medical expense flexible spending account or dependent care account unless the current “change in family or employment status” rules apply. It also does not allow changes in dental and vision care coverage.
An employer must amend the company’s Cafeteria Plan by the end of the 2015 Plan Year in order to implement the new revocation rules in 2014. If you need help with Cafeteria Plan documents or amendments, please call Claudia Allen at 513-629-9462 or e-mail email@example.com.
To view the new IRS Notice, click on the link below: