Q.- An employee enrolled in health coverage effective 1/1. He changed his mind and wants to drop coverage. Can we let him drop coverage and return the premiums he's already paid?
A.- Generally, an employee cannot retroactively drop health coverage after the coverage has become effective, except under specific circumstances outlined in IRS rules and the employer’s plan documents. If the employee enrolled through a Section 125 Cafeteria Plan (pre-tax contributions), changes are typically restricted to open enrollment or a qualifying life event (e.g., marriage, divorce, birth of a child). Simply changing their mind is not considered a qualifying event. Once coverage is effective, premiums are generally non-refundable because they fund the health insurance coverage for that period. If the employer allows the employee to drop coverage inappropriately, the employer could risk non-compliance with IRS regulations, which could jeopardize the entire plan's pre-tax status. You should review the plan documents and consult with a legal advisor.
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