Life Changes and Benefit Choices

Posted by BAS - 16 August, 2018

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Benefits offered to employees through a Code section 125 cafeteria plan must follow certain rules to maintain a tax-favored status. The IRS allows employees to pay for coverage with pre-tax dollars in exchange for the health plan following certain rules. One of the rules is that benefit elections may not be changed during the plan year unless the participant experiences an IRS-approved mid-year change event.

The Department of Labor has resources to help employees understand these permissible mid-year change events. According to the DoL, if employees know their benefit options, they can protect themselves and make sure they have the proper level of health coverage.

The DoL publication, Life Changes Require Health Choices, describes some important life events and how employees should consider their health coverage in connection with the event. Click here for a copy of the publication.

It addresses the following:

  • When you get married, you can change your health coverage, add yourself, your new spouse and your children to your employer’s plan, enroll in your spouse’s employer’s plan, or find coverage through the Marketplace.
  • Pregnancy, Adoption, Placement for Adoption. A new child by birth or adoption may cause a special enrollment period during which a mid-year enrollment in an employer’s health plan may be permitted.
  • Dependent Status. If a child ages out of a health plan at age 26, the child may be eligible for coverage under his or her own employer’s plan or may be eligible for Marketplace coverage.
  • Death, Legal Separation and Divorce. When an employee dies, legally separates or divorces, the covered spouse and dependent children need to consider their health options. The spouse and children may be eligible to enroll in an employer’s plan mid-year upon a divorce situation.

All employees should consider their health plan options upon life events. Employers should review employees’ life events to consider if mid-year changes are permissible under the terms of their plan.

Topics: HR & Benefits Compliance


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