125/QMCSO/CCPA Withholding Morass

[Guest Wayward]

Have you ever had one of those moments when the longer you look at something, the more confusing it becomes? I am there. There is probably a simple answer, but I appear unlikely to stumble upon it.

Employees have a way of doing inconvenient things. When a QMCSO is received, the employee earns enough that the employer can involuntarily withhold premiums for the medical plan coverage required by order. Employee maintains a cafeteria plan under which employee can elect cash or pre-tax benefits. Employer changes employee's cafeteria plan election to provide for the coverage required under the order as allowed under 1.125-4(d)(1). At some point later, employee no longer earns enough wages to involuntarily withhold premiums for an extended period of time. This could result from a pay cut or receipt of another support order that has priority over this order, etc. Unfortunately, the employee still works enough hours to remain "eligible" for coverage under the medical plan. This is where it all goes awry. According to the CCPA, we cannot involuntarily withhold the necessary premiums; a sentiment also echoed in the NMSN, itself which specifies the withholding limits. However, the cafeteria plan rules do not seem to include a permitted election change to allow the employer to stop making the 125 premiums for such coverage. Additionally, the rules governing QMCSOs provide that an employer may not stop withholding and disenroll the dependent unless the employer eliminates family coverage for all employees or receives written evidence that the order is no longer in effect or that the children will be enrolled in another plan no later than the date of disenrollment from the plan.

How should an employer handle this situation?

Thanks!

[Ron Snyder]

I think the employer should have his adviser ask anonymous strangers for advice on a bulletin board in order to make the decision. Or not.

This is a case where the plan's legal counsel should be consulted. If the plan doesn't have legal counsel, it may as well bite the bullet now instead of waiting for the inevitable lawsuit from the participant, the child's guardian, etc. when a decision based on advice from anonymous strangers is made.

[Chaz]

I think the employer should have his adviser ask anonymous strangers for advice on a bulletin board in order to make the decision. Or not.

This is a case where the plan's legal counsel should be consulted. If the plan doesn't have legal counsel, it may as well bite the bullet now instead of waiting for the inevitable lawsuit from the participant, the child's guardian, etc. when a decision based on advice from anonymous strangers is made.

Lighten up, Francis

[Ron Snyder]

Lighten up, Francis

Will do, Louise.