Changing carriers a status change???

[SLuskin]

I have a client who wants to change health ins. carriers mid plan year. They have a PPO, and it looks like they will be getting a PPO. They are changing because the employees are complaining.

I do not believe that there is either a curtailment or the addition of new coverage here. So, the question is, can employees add spouses, children, or enroll themselves when the new carrier's plan is effective and pay on a pretax basis? I do not think they can (pay for newly enrolled family members pretax or drop anyone without a real status change). The health agent is saying they can do whatever they want.

[KIP KRAUS]

I disagree with the health agent, what ever that is. If there is no substantial change in coverage there is no qualifying event. It doesn't sound like there is a substantial change in coverage.

[Guest Craig Phillips]

I have asked our 125 administrator this question on many occasions. Changing plans is not a "change in status". While the employee may continue pre-taxing their share of the premium, they may not change their FSA elections.

[GBurns]

While you cannot change the salary reduction agreement amount you can change the Payee.

In any case this is a Loss of Coverage issue not a change of status. Under both the Final and new Proposed Regs. a change in election is allowed when the coverage ceases as was always allowed under old 1.125-2 Q&A 6 (B).