In order to provide the pre-tax contributions to pay for benefits, cafeteria plans must require that elections be irrevocable for the period of coverage. This means that employees who participate in the cafeteria plan generally may not change their pre-tax elections mid year.
There is an exception to this rule for certain events recognized by the IRS as permitted election changes. Plans do not have to recognize all IRS-permitted change events, and do not have to allow participants to change elections mid-year. If the plan does recognize a mid-year change event, the change must be consistent with the event.
The IRS recognizes certain events as allowing a mid-year election change. These include:
- Change in status events, including:
- Change in legal marital status
- Change in the number of dependents
- Change in employment status
- Dependent satisfies or stops satisfying eligibility requirements
- Change in residence
- Certain cost changes (does not apply to health FSAs)
- Significant curtailment of coverage (does not apply to health FSAs)
- Significant addition or improvement of coverage option (does not apply to health FSAs)
- Change in coverage under another employer’s plan (does not apply to health FSAs)
- Loss of group health coverage sponsored by a government or educational institution (does not apply to health FSAs)
- HIPAA Special Enrollment Events
- Birth, adoption, placement for adoption
- Marriage
- Loss of other group health coverage
- Eligibility for or loss of eligibility for Medicaid or CHIP
- COBRA qualifying events
- Medical child support judgments, decrees or orders
- Medicare or Medicaid entitlement
- FMLA leaves of absence
The employer’s written cafeteria plan document must identify the events that will be recognized as allowing a mid-year election change. Employers may also wish to have procedures to make sure they are treating similar change requests consistently.
BAS can help administer mid-year election changes, and can work with your organization to provide a written cafeteria plan document. For more information, please contact your account manager or info@BASusa.com.
