Permitted election change in a Cafeteria Plan

[Guest McG]

Employee elects participation in his employer's Cafeteria Plan and contributes $260 per month in pre-tax dollars to cover the cost to insure his dependent spouse and children.

During the plan year the employee wants to revoke the election and delete dependent coverage because his spouse's employer changes insurance companies and she could insure herself and the dependent children for $130 per month through her employer's plan. The husband's contributions would then decrease from $260 per month to 0 because his employer pays 100% of the employee cost.

I'm thinking that this would be permitted as a family status change because the spouse has a new coverage option (because of the change in insurance companies) and the significant decrease in cost would fall under the cost and coverage rules.

Agree or disagree?

[KIP KRAUS]

An employer changing insurance companies in and of itself is not a QE, especially if the plan benefits do not change, and there is not a significant change in the employee's contributions. I wouldn't think this change in contributions would apply to a spouse's plan all of a suden being less expensive. Maybe I would want to know what the cost of the dependent wifes plan was before the employer changed insurers, and if it is significant I might let the employee make a change.

Just my way of looking at it from the regs. I've seen.

[Guest Debbie Button]

Why is the spouse's employer changing carriers? Is it open enrollment time for them? If it is, then a change would permissible. Otherwise, I agree with Kurt's analysis.

[Guest Debbie Button]

whoops, I meant Kip! sorry Kip!