FSA - Mid-year change in status / Qualified event question

[Guest Dupree]

I have a client offering a health plan through a calendar year cafeteria plan. This client has two employees who are husband and wife and are both covered by the same family policy, which also covers their kids. They just found out they are eligible to have their kids join New York's Child Health Plus program as of April 1st, 2011.

I'm fairly certain that the kids eligibility to enter the government program will trigger a qualified event to remove the kids from the Employer plan. However, we are then left with the husband and wife, who are both employees of the same company, still paying for full family coverage. There is no reason to put the kids on child health plus, if the parents still would have to pay for full family coverage. If this were open enrollment, they would have had the opportunity to join as two single policies, at a much reduced premium cost to them.

Is there any way they can change to two single policies mid-year (not changing health plans, just changing rating tier)? Does the qualified event triggered by the kids eligibility into a government program give them the ability to do this? I can't find a reference that definitively says they can or says they can't. Seems like a rare situation. It seems like this change would be inline with the intent of the law, but .... ???

knowledge, experience and information appreciated!

[MARYMM]

I have a client offering a health plan through a calendar year cafeteria plan. This client has two employees who are husband and wife and are both covered by the same family policy, which also covers their kids. They just found out they are eligible to have their kids join New York's Child Health Plus program as of April 1st, 2011.

I'm fairly certain that the kids eligibility to enter the government program will trigger a qualified event to remove the kids from the Employer plan. However, we are then left with the husband and wife, who are both employees of the same company, still paying for full family coverage. There is no reason to put the kids on child health plus, if the parents still would have to pay for full family coverage. If this were open enrollment, they would have had the opportunity to join as two single policies, at a much reduced premium cost to them.

Is there any way they can change to two single policies mid-year (not changing health plans, just changing rating tier)? Does the qualified event triggered by the kids eligibility into a government program give them the ability to do this? I can't find a reference that definitively says they can or says they can't. Seems like a rare situation. It seems like this change would be inline with the intent of the law, but .... ???

knowledge, experience and information appreciated!

There might be something helpful at this link about the ability to drop the kids

http://benefitslink.com/boards/index.php?s...amp;hl=medicaid

[Guest Dupree]

Thanks for replying, but dropping the kids wasn't the question. I need to find a way to split the family plan into two singles. What is the applicable Qualified Event for this? Does the "tag-along" provision provide for relief here?

[SLuskin]

Thanks for replying, but dropping the kids wasn't the question. I need to find a way to split the family plan into two singles. What is the applicable Qualified Event for this? Does the "tag-along" provision provide for relief here?

Because both people are retaining coverage, identical, etc. I think that would be up to the carrier.

[LRDG]

Will the plan be newly available or the children newly eligible April 11, 2011? If so, allowing the EE?parents to change their election to two seperate EE only premiums follows long standing 125 provisions for qualified status/election changes.

[Guest Dupree]

Will the plan be newly available or the children newly eligible April 11, 2011? If so, allowing the EE?parents to change their election to two seperate EE only premiums follows long standing 125 provisions for qualified status/election changes.

Yes, the kids are newly eligible for the State child health program. I agree that the parents should be allowed to split into two singles, but where does the law say it is allowed? Where is this "long-standing provision" written? Thanks!

[LRDG]

https://www.conexis.org/pdfs/Treas.%20Reg.%...n%20Changes.pdf

From IRC Section 1.125-4, Permitted election changes under Sec. 125 with respect to accident, or health coverage, group-term life insurance coverage, dependent care assistance and adoption assistance during the plan year, Page 23-24: Effective 01/10/2001

(e) Entitlement to Medicare or Medicaid. If an employee, spouse, or dependent

who is enrolled in an accident or health plan of the employer becomes entitled to

coverage (i.e., becomes enrolled) under Part A or Part B of Title XVIII of the Social

Security Act (Medicare)(Public Law 89-97 (79 Stat. 291)) or Title XIX of the Social

24

Security Act (Medicaid)(Public Law 89-97 (79 Stat. 343)), other than coverage

consisting solely of benefits under section 1928 of the Social Security Act (the program

for distribution of pediatric vaccines), a cafeteria plan may permit the employee to make

a prospective election change to cancel or reduce coverage of that employee, spouse,

or dependent under the accident or health plan. In addition, if an employee, spouse, or

dependent who has been entitled to such coverage under Medicare or Medicaid loses

eligibility for such coverage, the cafeteria plan may permit the employee to make a

prospective election to commence or increase coverage of that employee, spouse, or

dependent under the accident or health plan.