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Significant Cost Increase


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2 replies to this topic

#1 flexrh

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Posted 10 February 2003 - 01:32 PM

A group's cafeteria plan is on a calendar year cycle but the medical anniversary date is March 1st. The group currently pays 100% of employee-only medical coverage and 93% of depedent medical coverage. The group intends to pass a portion of the rate increase to the employees. Employees will now be responsible for 50% of dependent coverage. I expect many employees will want to keep their employee-only coverage (as the cost has not changed) but drop their dependent coverage (as many carry dependent coverage just because it's so cheap). Can we allow employees with family coverage to switch to employee-only coverage due to the significant cost increase (the regulations say "similar" coverage" -- does this mean "family to family", "single to single", etc.). There are no other medical options provided under the cafeteria plan.

#2 papogi

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Posted 10 February 2003 - 02:28 PM

Employees can drop to single coverage in this case. The cost change will be significant, and since no other plan is offered, coverage can be dropped entirely [1.125-4(f)(2)(ii)].

#3 charms

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Posted 18 February 2003 - 12:29 PM

My HR director would like to offer the employees an opportunity to elect additional pay in lieu of recieving company sponsored benefits. The plan is that employees would elect to not recieve employer contribution portion of premiums but could pay for the full cost of the benefit if they chose this option.

A number of questions have arisen based on changes being proposed. The biggest of these concerns the ability to make mid-year changes in their 125 election.

1. If ee has signed up for benefits under 125, can they drop their medical coverage due to the significant increase of cost to them at the time they change to PILB status even if change is mid-year? ie - they used to pay $20/pay for ind. coverage but now, without employer contribution, they would be responsible for the full $68.

2. If so, then do we have to offer the same option for them to elect medical coverage if they choose to drop this status mid-year. Does this become a qualifying event because of the decrease in their cost of the insurance?

3. Can this full amount fall under 125 for pre-tax deductions?

Thanks