BenefitsLink logo
EmployeeBenefitsJobs logo

Subscribe to Newsletters

Search the News

Featured Jobs
Senior Legal Counsel / Privacy Officer
Employee Benefits Associate
Retirement Plan Administrator
Defined Contribution Account Manager
Consultant / Team Leader (AFS)
Client Relationship Manager
DC Administrator
Defined Contribution Account Manager
Search all jobs
Get the BenefitsLink app for iPhone and iPad LinkedIn

Jump to content


"Significant" change in the cost of medical insurance

  • Please log in to reply
3 replies to this topic



    Registered User

  • Registered
  • 5 posts

Posted 13 July 1999 - 04:59 PM

Does anyone know what the IRS means by "significant cost of coverage changes", found in A-6(B)? The employer I work with is having a 9% increase in medical insurance premiums mid-year (that's mid cafeteria plan year). Is 9% considered significant? The employer would like for their employees to be able to drop or change their current coverage at this time.



    Registered User

  • Registered
  • 857 posts

Posted 16 July 1999 - 08:27 AM

I've never sean a spicific example as to what the IRS considers a signicant increase. They proably don't know either, but I might consider a 9% increase in an employee's contribution a significant encrease.
If the 9% increase is applied to , say a $50/mo contribution resulting in an additional $54 per year it may not be considered significant to one person ,but could to another.

On the other hand, if the 9% is applied to a $150 contribution resulting in an additional increase of $162 per year such an increase may be significant to everyone.
Unless you can come across some spcific IRS guidelines, I suggest using your best judgement.

#3 SLuskin


    Registered User

  • Registered
  • 521 posts

Posted 20 July 1999 - 05:15 PM

Even if there is a significant increase, the employee can only revoke the election if he/she prospectively elects similar coverage. If there is no alternative coverage, the employee is stuck with the increase.



    Registered User

  • Registered
  • 5 posts

Posted 20 July 1999 - 06:34 PM

Thank you both for your reply.
I did speak with Harry Beker this morning regarding this employer. He said basically what you both said. The IRS feels that 'significant' is a subjective term, and would depend on the makeup of the employer.
Also, if the employer is going to consider the rate increase significant, the employees have two options: They could keep their current election and accept the increase in premium- At which time the employer would make the corresponding change to the employee's pre-tax deduction. OR They could revoke their current election and receive coverage under another health plan with similar coverage. What I did not realize here is that under this option the new election must still be offered or allowed thru the employer under payroll deduction. This could include individual policies- which I personally would not advise. Mr. Beker said that no other elective adjustments are allowed unless there has been a change in family status.
Anyway, thank you guys for the info. By the way, we are seeing IRS audit activity in Texas.