One-time Opt-Out Payment

[Guest Aaron Pierce]

I have a client that currently offers an annual taxable opt-out payment to otherwise eligible employees that elect to waive coverage under the employer's health plan (let's assume that this current opt-out opportunity is made available under a cafeteria plan). The client wants to replace this annual opt-out with a larger cash payment to employees who elect to irrecovably waive coverage under the health plan for all future years, subject to some limited exceptions for employees who loss other coverage as a result of some "catastrophic" event, like the death or terminal illness of a spouse that results in the loss of other coverage.

I am told that this is not uncommon in the context of collectively-bargained health plans, but have not found anything on point in the relevant guidance.

Anyone see any reason that this can not be done under a cafeteria plan? In other words, can a cafeteria plan provide for an opt-out payment in single year in exchange for a wavier of health benefits in all future years?

I appreciate that such a waiver might raise excise tax implications under the PPACA employer mandate, if and when the mandate becomes applicable in 2014.

Thanks for any input you can provide.