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Monday, 06 October 2014 18:00

Section 125 Plans can now Allow Marketplace Enrollments Mid Plan-Year

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Employers who have non-calendar year plans have had challenges in the past when employees wanted to enroll in the Exchange Marketplace, but have already made a pre-tax election to take the employer’s health plan which binds them for the entire plan year.  This problem has been eliminated with a recent joint guidance, Notice 2014-55, issued by the Treasury and the IRS September 18, 2014.

Employers may now allow an employee to drop coverage in the middle of the plan year if it coincides with the annual open enrollment period of the Exchange Marketplace, and if the employee replaces their employer coverage with a Marketplace policy beginning the day after the employer coverage ends.

For example, an employer with a July 1 anniversary generally requires all employees to be enrolled until June 30 under their pre-tax election, barring a qualifying event.  Because the new rule expands the list of qualifying events, employees may be permitted to drop their employer coverage enroll in the marketplace coverage anytime during the open enrollment period of November 15 to February 15.  This employee could be allowed to have an effective date anywhere from January 1 to March 1, and can drop their employer coverage effective the day before their Marketplace policy begins.

The notice indicates that “A cafeteria plan may rely on the reasonable representation of an employee who has an enrollment opportunity for a Qualified Health Plan through a Marketplace that the employee and related individuals have enrolled or intend to enroll in a Qualified Health Plan for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.” This means you don’t have to personally verify the enrollment but can simply accept a statement (we suggest this be in writing) from your employee.

The cafeteria plan must be amended to allow for these types of election changes, no later than the last day of the plan year during which these new elections are to be allowed.  This will allow Marketplace elections retroactively back to the first day of that same plan year as long as all participants are notified of the amendment. If you plan to allow employees to move to the Marketplace during the 2015 open enrollment period, be sure to amend your Section 125 plan prior to the last day of your plan year in 2015.

If you aren’t sure whether you have a Section 125 plan document at all, please This email address is being protected from spambots. You need JavaScript enabled to view it. so we can help you get in compliance! 

 

Read 9834 times Last modified on Monday, 14 September 2020 20:23
Kristen Russell

Kristen founded Fall River Employee Benefits as the culmination of her insurance industry career as an actuary, underwriting executive & consultant. As an Assistant Vice President at Great-West Healthcare (now part of CIGNA), she managed a $1 Billion block of health insurance. She also worked as a Senior Consultant at Reden & Anders, consulting to insurance companies and large employers throughout the country. Ms. Russell received a Bachelor of Science, Business Administration in Actuarial Science, is a member of the American Academy of Actuaries and achieved Fellowship in the Society of Actuaries through a rigorous nine-year series of exams.

Kristen grew up in Iowa but has lived in Colorado since 1993, currently living near our office in the Lower Highlands neighborhood near downtown Denver.  She enjoys bicycling, hiking, traveling and has a special passion for non-profit volunteering. She is married to an incredibly talented photojournalist, has two adult stepdaughters and an adorable Border Collie/Lab mix named Chaco.