08/03/2015

IRS Adds to Permitted Change in Status Events

IRS Notice 2014-55 outlines two new change in status events for Cafeteria Plans. The change in status events outlined are 1) when an employee will have their hours of service reduced to below 30 hours a week on average but is still eligible for the employer’s group medical plan and wants to cancel coverage and 2) an employee is enrolled in the employer’s group medical plan and wants to enroll in a plan offered through a Marketplace.

Employee Experiences Reduction in Hours

Previously, if an employee experienced a reduction in hours but was still eligible for the employer’s group medical plan after the reduction in hours, they were not permitted to make an election change. With the new guidance, if an employee’s hours are reduced and will be, on average, less than 30 hours per week, they may make a corresponding election change for their group medical plan. The change can be made prospectively and the plan can rely on the employee’s certification that they expect to be working less than 30 hours per week when allowing for the change.

The change in status request must still follow the consistency rules and does not apply to health flexible spending accounts.

Employee Wants to Enroll in Coverage through a Marketplace

The notice clarifies that an employee who would like to enroll in a Qualified Health Plan through the marketplace and is currently covered under the employer’s group medical plan may make a corresponding change in election and cancel coverage under the employer’s group medical plan. The change can be made prospectively and the plan may rely on the certification from the employee that they intend to enroll in the plan through the Marketplace.

The change in status event does not apply to health flexible spending accounts.

The guidance for both change in status events is effective as of September 18, 2014. Until the regulations are amended, the guidance outlined in Notice 2014-55 may be relied upon.

If a Cafeteria Plan would like to add the new change in status events the plan will need to be amended to allow for the new change in status events before the end of the plan year in which the change in status is allowed. Plans may be amended retroactively back to the start of the plan year that begins in 2014 and ends before or during 2015. Election changes may only be made prospectively based on the effective date of the guidance.

To read the complete notice, click here .

If you would like to amend your plan to allow for these changes, please contact your myCafeteriaPlan Account Representative.

BusinessPlans, Inc. – myCafeteriaPlan does not intend to provide legal or tax advice and information contained in this article should not be interpreted as such. Regulations governing pretax plans are often open to interpretation and should be reviewed with your legal or tax advisor before making any decisions regarding your plan.

Posted 8/3/15