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:
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.