Guest mkleihauer Posted April 9, 2003 Posted April 9, 2003 I am working with a client who allows their employees to drop medical and/or dental coverage for themselves and/or dependents at any time without a COBRA qualifying event. The plans are both pre-tax. What is this employer's legal liability for allowing these types of changes?
papogi Posted April 9, 2003 Posted April 9, 2003 The underlying health plans (medical and dental) may allow an employee to drop at any time (most do by their statement that coverage ceases when premiums are no longer paid). Since the plans are being funded through pre-tax payroll deductions, Section 125 and its provisions are called into play. The employer is not in compliance. This one will be pretty obvious to the IRS, and could create a lot of back taxes to pay by the employees and employer, as well as penalties to the employer. This one is a bomb waiting to go off.
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