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Mid-year status change while on unpaid leave of absence, election change upon return?


jsb
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Employee is on unpaid LOA, declined continuation coverage so there is a break in coverage. Normally upon return to active payroll status, benefits and 125 elections pick up where they left off.

During LOA, employee gets married. Wants to add spouse to coverage. Plan allows 60 days to make election changes, but employee does not return to active payroll and benefits status until 100 days after marriage.

Do you allow the employee to add spouse upon return from LOA even though it is 100 days after the qualifying marriage event? Or, do you REQUIRE the employee to notify you of the marriage within the normal 60 day window in order to be able to add spouse upon return?

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I'd check with the insurer.

If the insurer denies adding the spouse, tell that to the employee in writing and explain why.

If the insurer is OK with it, I'd let it go, but give the employee verbal grief about how they need to take this stuff seriously and could have been denied. And if it's OK in this case, it should be OK-ed in future similar cases.

Although information about deadlines is in the SPD, it can be a detail that those who do read the SPD miss. To alert new hires, therefore,we have them sign a 'promise' to tell us if certain, listed basic things happen in their lives that might affect health or pension coverage, like, marital status, added child, Medicare eligibility, address and phone, etc. The paper reminds them that eligibility for some benefits requires notice within as little as 30 days after an event.

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GMK, thanks for the reply. The insurers will not be the problem. My concern is the 125 election change. Because the employee is not covered by the plan at the time of the event, is notification required at that time, or is notification at the time that coverage gets reinstated going to be sufficient, from an IRS perspective? On one hand, I don't have a big problem considering the reinstatement of coverage to be its own QE, which then allows 60 days to make changes. On the other hand, however, upon return from LOA coverage is automatically reinstated at the pre-LOA level, and once the first paycheck runs, the "election" is in force. Once in force, can the election be changed?

This is a bit akin to brief termination of employment and loss of coverage. If the former employee is rehired, their pre-termination 125 elections should be reinstated. Now suppose they had a baby, or acquired a new spouse during the break in employment. Can you change the 125 election?

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Since the election change event occurred, the participant can make the 125 election change. The only question is the timing of the participant's notification.

It's just my opinion, but I would not have a problem disregarding the unpaid leave of absence days during which the participant is not covered under the health plan. I hear what you are saying, but what would it mean to receive a 125 election change notification from any employee, active or on unpaid leave, who is not covered under the health plan? Notification when their health coverage is reinstated would be sufficient for me.

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