Adding/Deleting Dependents on Health Insurance

[Guest Marlene Newman]

I've just started working for a company that is allowing employees to add and delete dependents on the health plan for reasons I find unusual. For example, if an employee's spouse has open enrollment at their workplace and decides that their plan has become very expensive, my company's employee wants to add their spouse at a non-open enrollment time to save on household expenses. Is that acceptable? Legal? I know that there are legal reasons (change in family status or qualifying events) for making a change, but I need to know if the arbitrary reasons people want to add or drop coverage for themselves or a dependent are governed by the employer, the government or by the insurance carrier.

[KIP KRAUS]

Actually, a major increase in the cost of medical coverage can qualify as a change in status under IRC Section 125. Therefore, if your employee's spouse experiences a major increase in the cost of coverage at his/her employer's open enrollment, you can allow the change to your plan. You are, however, allowed to require evidence from the other employer plan that the cost has increased, and by how much.

Your Section 125 Plan should completely describe the conditions under which plan changes can be made. In addition, these conditions should be fully described in your SPD.

By the way, the plan administrator, using the guidelines of Section 125, has some descrition to make reasonable interpretations as to what qualifies as a change in family status.