Open Enrollment Anytime

[Guest deacon]

Can an employer with a POP or a Cafeteria Plan not have an annual enrollment but instead allow employees to make changes at any time with the effective date being the first day of the month following the date of change? This may include changes that do not follow under the Change in Status provision.

[mroberts]

Depends on what plans you're talking about and it depends on what your insurance carriers think. For example, if you have a contributory LTD plan or an optional life plan, good luck with your carrier saying no problem.

Most carriers probably wouldn't allow them when it came to medical because there would be nothing in place to stop an employee or dependent from abusing the plan and then dropping coverage.

[papogi]

I have been doing simlar research recently, including consulting these message boards, and using other sources. If the employer has a Cafeteria Plan, pre-tax deductions are being taken. In order to maintain these tax advantages, the IRC reasonably clearly outlines all the possible status changes that would allow any mid-year changes to the pre-tax deductions. It is important to separate the Cafeteria Plan/Section 125 from the provisions of the underlying plan. If the plan allows mid-year changes such as you describe, and I agree with mroberts that such a liberal plan is not wise, then the changes can be done, effective whenever the plan provisions specify. Such loose plan provisions would be very rare in the insurance world, even in the self-funded side of things. Separate from the underlying plan's provisions, you then have Section 125. Say, for example that your plan allows for a dependent to come on the health plan at any time, for no apparent reason, no loss of other coverage, no gaining of eligibility, etc. The Section 125 rules do not see this as any change of status, so while the employee can make a change under the plan, it can't be done on a pre-tax basis since it does not abide by Section 125. Payroll deductions for the added dependent should be taken on a post-tax basis.

[GBurns]

papogi,

In your research, What did you find under state law regarding the employee elections and salary deductions or reductions?

There are apparently many state laws governing labor and payroll that conflict with section 125.

[papogi]

I admit I don't know enough about state laws on this topic, and certainly not Florida. Hopefully someone else can chime in when it comes to state laws...

[Greg Judd]

Originally posted by papogi

....I agree with mroberts that such a liberal plan is not wise....Such loose plan provisions would be very rare in the insurance world, even in the self-funded side of things.

Rare indeed, but not entirely unheard of (if we're counting self-funded sponsors), and could be wise-or at least not catastrophically unpredictable- depending on your industry, the nature of your plan design, & workforce & turnover.

think "employers with very predictable turnover patterns, generous benefits (in an industry with tradition of generousity), & little or no employee contributions for coverage".

Not many of those left, but they're out there....

[Guest ronc]

The Commonwealth of Virginia employee health plan conducted what they called a "floating" open enrollment for about three years but have since discontinued and have returned to the traditional annual open enrollment

The floating open enrollment allowed an employee to make an "open enrollment-type" change at any time of the year as long as they had not made a similar change within the last 12 months. The normal "mid-year" Section 125 qualified changes could be made at any time and did not count as an open enrollment change.

The Commonwealth found this concept successful with their retiree group and extended it to the active employee population of 120,000.

I understand that they requested a determination from the IRS, but I do not know if they ever received one. It may be the reason they discontinued that approach.