Late Enrollee in cafe plan?

[Guest jmh]

We have an EE who missed the 30 day deadline upon the birth of his daughter to add her to our medical plan. Now 5 months later he is trying to add her. He claims he is able to add her as a late enrollee and he will pay an after tax premium for her to be added. Since our medical is part of our pre tax cafe plan are we okay in denying his demand? I thought the late enrollee provisions related to preexisting conditions?

[Guest JerseyGirl]

What does the insurance company have to say about this? Will they allow this late a late enrollee? Before we start done the road of what should/should not be allowed within the 125 plan, let's find out if his request is possible. Seems to me that 5 months is an awfully long time to have a new member of a household before dicovering that you might want to have health insurance for this *newcomer*. Is there an underlying reason for the cahnge of heart?

[GBurns]

The payment of premiums on a pre-tax basis for the medical is part of your Cafeteria Plan, the medical insurance coverage is not.

If this employee wants to pay after tax as you posted, it therefore has nothing to do with the Cafeteria Plan.

However, as JerseyGirl pointed out, getting medical coverage depends on the insurance company and policy terms, not on your Cafeteria Plan.

[jsb]

GB - You state "[t]he payment of premiums on a pre-tax basis for the medical is part of your Cafeteria Plan." Agreed for employee cost of coverage. Do you see tax issues with any (pre-tax) contribution made by the employer? Eg. employer pays $300 toward individual coverage and pays $500 toward family coverage. Adding the child kicks the enrollment level up to family coverage.

I think as a matter of plan design you can manage late-adds. By policy, we do not permit late adds except in the rare case of adminsitrative error. Part of the problem is that we are limited by our payroll system in our ability to implement post-tax payroll deductions for benefits. Also, our carriers are not consistent as we have one carrier with "late add" language that specifically states if you miss your 30 day enrollment window, you wait until the employers next annual enrollment period, that is, no late adds ... period. Our other carriers would permit a late add, some with no conditions, others with underwriting. So by policy, we do not permit it.

[GBurns]

"Do you see tax issues with any (pre-tax) contribution made by the employer?"

An employer's contribution or payment of all or part of any premium is not pre-tax and not under your Cafeteria Plan. Pre-tax amounts appear on the employee's pay stub, employer's contributions do not. The pre-tax amounts are the amounts that the employee elects to have reduced from their wages under section 125. Employer's contribution, whether partial or full premium, are excluded from the employee's gross income because of section 106 not section 125.

Maybe I do not understand your question, because I see no problem or even a reason why you have an issue with the $300 - $500 change.

Re"Part of the problem is that we are limited by our payroll system in our ability to implement post-tax payroll deductions for benefits."

I suspect that the real problem is not your payroll system but the persons using it.

If it is your policy not to allow late enrollment, Why are you questioning yourself this time? I hope that this "no late enrollment" is written in both your SPD and Plan Document. If not you really are taking a risk in denying this person by adding restrictions beyond those of the insurance carriers and your own PD.

[jsb]

GB, I apologize for my misapplication of terminology when I referred to a "pre-tax" contribution by the employer. I really meant a "contribution by the employer that does not have a tax consequence to the employee" thereby being effectively "pre-tax" to the employee. I appreciated your 106 reference.

My reference to my payroll system "problems" was just perhaps a little softer than yours. I believe computers should be able to do most anything and are pretty much only limited, as you point out, by the user. (Or as in this case, the programmers, configurers, or others who have set up the parameters of the internal workings of the box. I'm sure ours can be reprogrammed to do post-tax employee deductions, but it is just not high enough on anybody else's priorty list to make it into the "system enhancement" queue.)

I was not the original poster and am not questioning whether or to do the late add. Our policies are clear, consistent, well documented, and well communicated. We don't permit late adds.