Optional dependent medical premiums

[1x2]

Hello,

I'm hoping for some clarification on the following:

We have a medical fully insured plan.

ER pays 100% of EE premiums.

EE can elect family coverage, but must contribute towards the premiums; ER will also contribute a set amount per month.

The EE has to sign up for the coverage and list dependent info; e.g., name, dob, gender, etc.

The "election" to cover the dependents is valid until revoked by the EE.

The payroll system is configured with one deduction function that withholds the employee portion for each periodic payroll, as a pre-tax deduction.

The questions I have are:

Must we have a cafeteria plan for this?

If we do, must we demand from the employees an election each year to "defer" their co-pay, in view of the fact that the dependent insurance is in place forever until the employee decides to change it?

(Note: the fact is we do have a caf plan, but it seems a wasted expense for the above purpose).

Thank you in advance for your time and thoughts.

[GMK]

as a pre-tax deduction.

Without a cafeteria plan, premiums cannot be deducted pre-tax.

The plan document will say whether previous 'elections' continue until changed or if they need to be "renewed" annually. Generally, they follow the insurance coverage choices.

Agreed on the price of such plans, especially if you slam dunk pass non-discrim testing. But then someone has to pay for the plan doc and amendments and the testing.

[1x2]

Thank you for your quick response, GMK, and thanks for the sympathy vote on the plan cost

[Chaz]

You don't need to require an annual election (although it is common to and advisable). It's your choice what goes into the plan document.

If the EEs can opt in and out of dependent coverage, you definitely need a cafeteria plan.

I'm sure you know that EEs can't revoke their elections mid-year except in the event of certain changes in status, etc.

[1x2]

This is great, Chaz, thanks to both of you, 100% of what I needed to know.

[oriecat]

If the only thing you are doing is the pre-tax premiums, you only need the limited type of Section 125 plan often called a Premium Only Plan or POP. You would not need a full blown cafeteria plan. POP plans should be pretty cheap, so it sounds like you might be paying for more than you really need to.

[1x2]

If the only thing you are doing is the pre-tax premiums, you only need the limited type of Section 125 plan often called a Premium Only Plan or POP. You would not need a full blown cafeteria plan. POP plans should be pretty cheap, so it sounds like you might be paying for more than you really need to.

Duly noted. But once the barn door's opened, it seems everything wants out...