Additional Permitted Election Changes for Sec. 125 Plans

09/23/2014

The IRS issued IRS Notice 2014-55 which addresses two additional instances an employee can revoke their employer-sponsored group health plan coverage mid-year.

  1. Revocation due to reduction in hours of service: A participating employee whose hours of service are reduced so that the employee is expected to average less than 30 hours of service per week but for whom the reduction does not affect the eligibility for coverage under the employer’s’ group health plan. The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the employee, and any related individuals who cease coverage due to the revocation, in another plan that provides minimum essential coverage with the new coverage effective no later than the first day of the second month following the month that includes the date the original coverage is revoked.A cafeteria plan may rely on the reasonable representation of an employee who is reasonably expected to have an average of less than 30 hours of service per week for future periods that the employee and related individuals have enrolled or intend to enroll in another plan that provides minimum essential coverage for new coverage that is effective no later than the first day of the second month following the month that includes the date the original coverage is revoked.
  2. Revocation due to enrollment in a Qualified Health Plan: The employee is eligible for a Special Enrollment Period to enroll in a Qualified Health Plan through a Marketplace pursuant to guidance issued by the Department of Health and Human Services and any other applicable guidance, or the employee seeks to enroll in a Qualified Health Plan through a Marketplace during the Marketplace’s annual open enrollment period. The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the employee and any related individuals who cease coverage due to the revocation in a Qualified Health Plan through a Marketplace for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.A cafeteria plan may rely on the reasonable representation of an employee who has an enrollment opportunity for a Qualified Health Plan through a Marketplace that the employee and related individuals have enrolled or intend to enroll in a Qualified Health Plan for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.

To allow the new permitted election changes under this notice, a cafeteria plan must be amended to provide for such election changes. To view the IRS Notice: http://www.irs.gov/pub/irs-drop/n-14-55.pdf

If you have any questions, please contact your WGA’s Health Reform Advisory Team at healthreform@WGAins.com. And remember to routinely check the Health Reform Advisory Corner of our website or our blog for important information.