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Mid-year change in salary band with related increase in premium - change in status?


t.haley
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Premiums for health insurance plan based on what "salary band" an employee is in.  If an employee gets a raise mid-year such that he jumps up to another salary band (which raises his premium), is this a change in status under Section 125 allowing a change to the employee's election for the remainder of the year?

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Is it safe to assume that any increases in compensation will more than cover any increases in the premium?  I would expect that a $100 increase in pay would not result in a $200 increase in the premium.  Not so?

I would not think that a mid-year increase in premium would not equate to a change in status that would allow a mid-year change in election.  But I don't practice in that area, so I don't know.

Always check with your actuary first!

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Regs are silent about the amount, but from what I have seen if you stay below 15% you should be ok.  By the way, while changes are allowed, the employer does not need to make them available.  You should check the plan docs, there may be language already there.

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If the increase is significant, then  yes. I haven't seen a definition of significant -- but it should be reasonable.  What percent increase is the cost of coverage at the higher salary rate?   I would also consider as an employer whether to "lock" the rate at the beginning of the plan year rather than switching premiums mid-year to avoid the issue unless you think you will have nondiscrimination issues for someone becoming an HCE soon after the beginning of the year but paying a lower amount.

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I may be wrong, but one is or is not an HCE for a given year, and I think it is based on the prior year's compensation.  Changes in compensation level during a year do not push one, cannot push one, from being a non-HCE to being an HCE during the year. 

Always check with your actuary first!

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