Mid-year status change: enrollment v. election

[Guest kmbrown]

Looking for clarification - I understand that if an employee was eligible for coverage but declined coverage, a change in status will qualify that employee to enroll for group health coverage mid-year. But if the employee was not enrolled in any of the plans offered, does a mid-year status change also qualify that employee to enroll in non-health plans (i.e., dependent care plan)? The regulations for change in status make reference to "enrollment" in 1.125-4(B) and "election" in 1.125-4© so it appears that it looks like an allowable change in election may not include enrollment (except in group health plans). Also, if the only enrollment is for group health plans, does that include medical reimbursement plans or only health insurance plans? Thanks in advance for any help on this.

[papogi]

125-4 deals with events which allow mid-year election changes. Except as otherwise noted specifically in the regs (e.g., cost and coverage changes do not apply to health FSA’s) this section applies to accident and health coverage, group term life insurance, dep care assistance, and adoption assistance. Keep in mind that status changes do not allow an employee to make any and all changes. Consistency rules apply. For instance, a change in residence is a status change. Under consistency rules, this status change results in few election changes, since it does not often result in a change in eligibility for a qualified benefit.

Please post details of your situation so we can address it specifically. It might help illustrate the point.

[Guest kmbrown]

I do not have a specific circumstance but am working on a plan change for an employer and the employer's administrator told me that she had been had been told that while mid-year election changes were allowed in certain situations (assuming they were consistent, etc.), those allowed mid-year election changes did not include enrolling for plans in which the employee had never been enrolled in before, but only inluded increasing or decreasing existing elections. It had been my impression that "election change" would include enrolling (still assuming consistency). For example, if the employee had never enrolled in any of the benefits plans offered by the employer and had a child during the plan year, would that employee be able to enroll in the dependent care assistance reimbursement plan after the baby was born? When I looked at the regulation, I didn't see any example of going from no election to a new enrollment/election, only increases or decreases of existing elections.

[papogi]

Your interpretation is correct. Status changes do not only allow increases or decreases, but could also allow initial enrollment into benefits (assuming consistency rules are met, as you said).

Check out this link for a good breakdown of allowable changes:

http://www.125plan.com/COS_Matrix.PDF

[Guest kmbrown]

Thank you for your help! It is much appreciated. Unfortunately, the link you provided is not working for me - could you doublecheck it?

Thanks

[Mary C]

There's another regulation to consider here - HIPAA. HIPAA states that the birth or adoption of a child is an event to allow the enrollment of the child and any family member in health care within 31 days of the birth or adoption. This includes employees who had previously waived coverage may now elect it.

[Guest kmbrown]

Mary-

In case I am missing something, I thought I would ask further. In my original email, I tried to exclude health coverage from my question, knowing that HIPAA specifically covers the ability to enroll for health coverage where previous enrollment was waived. Does HIPAA also have some effect on the non-health care benefits and mid-year enrollment that I am unaware of? Also, I had understood that the "health coverage" to behealthcare insurance - does HIPAA affect medical reimbursement benefits?

Also, it turns out my internet connection is having problems so the link pagogi gave is probably fine but my system isn't.

[papogi]

HIPAA only deals with health benefits, and addresses the minimum requirements under which you must allow someone on your underlying health plan. Technically, it has no bearing on 125 plans. For illustration, if your 125 plan does not recognize any status changes and does not allow any mid-year changes (while extreme, this is allowed), HIPAA would require that the newborn be added to the health plan, but HIPAA can't force the employer to allow pre-tax deductions related to that newborn. Additional deductions would need to be post-tax. The 125 plan is separate from the underlying health plan.

If the link doesn't work, try going to www.125plan.com, click on Flex Tech Links, then scroll down and click on Change in Status Matrix.