BenefitsLink logo
EmployeeBenefitsJobs logo
Get the BenefitsLink app for iPhone and iPad LinkedIn
Twitter
Facebook
Search the News


Featured Jobs
Senior Retirement Plan Consultant
Retirement Plan Administrator
Retirement Services Manager
Qualified Plan Specialist
Senior Benefits Actuary/Consultant
ERISA Attorney
Retirement Plan Administrator II (Compliance Analyst II)
Compliance Analyst
Search all jobs
 

 
 
 

Jump to content


Photo

Section 125 and open enrollment


  • Please log in to reply
7 replies to this topic

#1 papogi

papogi

    Registered User

  • Registered
  • 778 posts

Posted 14 March 2002 - 04:48 PM

Assume that an employer does not have an open enrollment period, but that they do operate under a Section 125 flex plan. Since flex plans have the 12 month rule and require annual elections, does this overide the employer's desire not to have open enrollment, and basically force them to adopt an annual open enrollment coinciding with the flex plan's plan year?

#2 mroberts

mroberts

    Registered User

  • Registered
  • 433 posts

Posted 15 March 2002 - 08:18 AM

Just out of curiosity, is there a reason the employer is against having an open enrollment period?

#3 papogi

papogi

    Registered User

  • Registered
  • 778 posts

Posted 15 March 2002 - 08:41 AM

Honestly, I'm not sure of their reason. I can guess that the employer did not always operate under Section 125. Also, at one point they were probably fully-insured, purchasing benefits from a traditional insurer. Somewhere along the line, they must have been convinced, perhaps by a broker, that not having open enrollment would limit adverse selection. They are now a self funded employer, and in that transition, might have adopted the flex approach as well. The lack of an open enrollment might be a leftover provision from years ago. My thinking is that their flex plan forces them to have open enrollment...

#4 mroberts

mroberts

    Registered User

  • Registered
  • 433 posts

Posted 15 March 2002 - 09:41 AM

If employees pay at least a portion of the medical benefits your company offers, then an open enrollment period would have to be offered. Perhaps the employer may not want to call it that, but employees have to be able to opt out of coverage if they no longer want to pay from premium. If your company picks up the entire cost for medical benefits, I suppose they wouldn't have to offer one since the employees would have no reason not to accept the coverage. With respect to the section 125 plan, yes, employees do have to make annual elections.


When it comes to non-medical lines, it's going to depend on your carriers contracts. Some carriers will allow you to make changes at any point during the year and some will only allow you to make changes at an open enrollment period as designated by the employer.

Shoot me an email if you would like to discuss further.

#5 Sandra Pearce

Sandra Pearce

    Registered User

  • Registered
  • 225 posts

Posted 15 March 2002 - 01:01 PM

Just another thought. The health plan does not have to have an open enrollment. By this I mean that the health plan, even operating under a 125 plan, is not required to allow late entrants into the plan in other than HIPAA required circumstances.

#6 papogi

papogi

    Registered User

  • Registered
  • 778 posts

Posted 15 March 2002 - 01:27 PM

If that is the case, then the primary thing that can be changed during "open enrollment" would only be FSA elections. Again, even though Section 125 requires annual elections, an employer's desire not to have open enrollment overides this, and employee's can't add or remove dependents from their health coverage? So the only annual elections would really be FSAs in this case. I've combed what I can in the IRC, and can't find anything convincing enough to prevent confusion. Sandra, do you have anything you can cite?

#7 Sandra Pearce

Sandra Pearce

    Registered User

  • Registered
  • 225 posts

Posted 15 March 2002 - 02:51 PM

I probably haven't been clear. Our 125 plan allows for changes annually (if those changes are allowed by the underlying plans). Annually our employees can choose to add a spending account or change their prior election from pre-tax to after tax (or vice versa). If they chose to stop pre-tax election for the health plan they can drop out of the health plan. However, because there is no open enrollment allowed in our health plan they cannot elect to enter the heatlh plan during the 125 enrollment. They could enter the health plan and the 125 plan with a HIPAA qualifying event.

#8 papogi

papogi

    Registered User

  • Registered
  • 778 posts

Posted 15 March 2002 - 03:34 PM

This is helping immensely, Sandra. Specifically, if the employer does not offer an after-tax option and does not have open enrollment, employees and dependents on the health plan must stay on the plan. Sandra, do you know of any related government documentation that could also be cited? I know specific situations are rarely addressed in rules and regs, but I was hoping you might have some ideas.