Cafeteria Plans 101

Let’s start with the basics.

A cafeteria plan is an employer-provided written plan that offers employees the opportunity to choose between at least one permitted taxable benefit and at least one qualified employee benefit.

Employees of employers with cafeteria plans may obtain such benefits as health insurance, group-term life insurance, voluntary “supplemental” insurance (dental, vision, cancer, hospital confinement, accident, etc.), adoption assistance, dependent care assistance benefits, and flexible spending accounts through the plan.

This may be a great option for your business. We can help you make that determination and we can also, help you with the open enrollment period and the inevitable changes that your employees might want to make, after open enrollment.

Changes

Now that open enrollment season for Cafeteria plan elections is behind us, it is inevitable that unforeseen situations may come up that will make one wish they could change that Cafeteria plan election.

There are a few rules for allowing plan election changes.  A cafeteria plan may permit an employee to revoke an election during a period of coverage and to make a new election only in limited circumstances, such as a change in status event.

Change in status events include:

  • changes in the number of an employee’s dependents
  • change in marital status
  • change in employment status
  • a dependent satisfying or ceasing to satisfy requirements
  • a change in residence
  • starting or termination of adoption proceedings

Or if you have a non-status event, you can make a change if:

  • Significant cost changes
  • Significant curtailment (or reduction) of coverage
  • Addition or improvement of benefit package option
  • Change in coverage of spouse or dependent under another employer plan
  • Loss of certain other health coverage (such as government provided coverage such as Medicaid
  • Changes in 401(k) contributions
  • HIPAA special enrollment rights
  • COBRA qualifying event
  • Judgment, decrees, or orders
  • Entitlement to Medicare or Medicaid
  • Family Medical Leave Act (FMLA) leave
  • Pretax health savings account (HAS contributions)

Together, the change in status events and other recognized changes are considered “permitted election change events.”

There are some events not in the regulations that could allow an individual to make a mid-year election change, such as a mistake by the employer or employee, or needing to change elections in order to pass nondiscrimination tests.

Cafeteria plans are not required to allow employees to change their elections, but plans that do allow changes must follow IRS requirements.

These requirements include consistency, plan document allowance, documentation, and timing of the election change.

As you might have guessed, there are lots of rules and regulations to make a change.

Here at the Cleveland Company, we have all the tools to navigate the roadmap of change. And you can too!

Plus for your convenience, we’ll also be emailing you a link to the White Paper: UBA White Paper “Cafeteria Plans: Qualifying Events and Changing Employee Elections”. This White Paper is loaded with information, examples, and actionable intelligence.

And as always, be well.

John

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