Change in Status?

[Chaz]

Employee has enrolled 17-year old step child in cafeteria plan. Step child moves out and in with birth mother and enrolls in birth mother's plan. Employee wants to end contributions for the step child. Change in status?

[SLuskin]

Employee has enrolled 17-year old step child in cafeteria plan. Step child moves out and in with birth mother and enrolls in birth mother's plan. Employee wants to end contributions for the step child. Change in status?

Is there a court order?

[Chaz]

No court order.

Before PPACA, this wouldn't have been a problem because the child would likely lose eligibility under the employee's plan because the child no longer met the definition of dependent but the age 26 requirement changed this rule.

[masteff]

I'm shooting from the hip (i.e., not looking at the rules before I answer), so sorry if I'm slightly off target but... I'd think it likely that moving to live w/ the birth mother resulted in the step-child gaining eligibility under birth mother's plan.

[J Simmons]

The child is yet eligible as a dependent of the child's father, as when the coverage for the year was elected. So the father's number of dependents has not changed mid-year.

There is no mid-year employment change for the child or the father's spouse with an attendant change in eligibility of the child for health coverage.

The change in the child's residence has no effect on his continuing eligibility under the father's coverage. So Example 4 of Treas Reg sec 1.125-4©(2)(4) would overide the oblique statement in Treas Reg sec 1.125-4©(2)(v) ("A change in the place of residence of the ... dependent.")

Was the child eligible under the mother's coverage, even though not living with her, at the time the coverage for the child was elected by the father? If so, I'd definitely say no. If the child's move gained eligibility under the mother's coverage, then I think the mother's plan could permit her a mid-year addition of what would be duplicative coverage for the child, but I do not think that the father's plan could allow him to stop the child's coverage since the child is yet an eligible dependent of the father.

[SLuskin]

I agree. Absent a court order, I don't see a status change here. It doesn't seem "fair" to the employee, but this seems to be one of those situations where the employee is stuck until open enrollment.

[masteff]

Could someone explain for me because I thought "change in status under another employer plan" was grounds to allow a prospective change. If moving to live w/ the birth mother resulted in a change in eligiblity for the child, why would "change in status under another employer plan" not apply now?

[J Simmons]

Could someone explain for me because I thought "change in status under another employer plan" was grounds to allow a prospective change. If moving to live w/ the birth mother resulted in a change in eligiblity for the child, why would "change in status under another employer plan" not apply now?

You might be thinking of "Change in coverage under another employer plan" and "Loss of coverage under other group health coverage", Treas Reg sec 1.125-4(f)(4) and (5), respectively. They don't quite fit this situation.

[masteff]

(4) Change in coverage under another employer plan. A cafeteria plan

may permit an employee to make a prospective election change that is on

account of and corresponds with a change made under another employer

plan (including a plan of the same employer or of another employer) if--

(i) The other cafeteria plan or qualified benefits plan permits

participants to make an election change that would be permitted under

paragraphs (b) through (g) of this section (disregarding this paragraph

(f)(4)); or

(ii) The cafeteria plan permits participants to make an election for

a period of coverage that is different from the period of coverage under

the other cafeteria plan or qualified benefits plan.

They don't quite fit this situation.

Sorry I'm feeling thickheaded this week but what am I missing for why it doesn't fit? The above quoted regulation does not include any requirement that the child must lose eligiblity in the current plan (which you appear to have added as a requirement in your post yesterday), only a permitted change in coverage in the other plan. If and only if the child was added to the other plan in accordance w/ paragraphs (b) through (g) of 1.125-4, then I read that the employee should be allowed a corresponding change in the current plan. Or please be more detailed about what I'm missing.

Edit: (f)(6) Example 3 supports that loss of eligibility in the current plan is not required for the application of the rule under (f)(4).

[Chaz]

Could someone explain for me because I thought "change in status under another employer plan" was grounds to allow a prospective change. If moving to live w/ the birth mother resulted in a change in eligiblity for the child, why would "change in status under another employer plan" not apply now?

Under health care reform, an under age 26 child must be eligible for coverage where ever the child lives. Thus, moving to live with the birth mother would not result in a change in eligibility for the child (under either plan) because, effective January 1, 2011 (assuming a calendar plan year) the child was eligible under both plans.

I think this type of scenario is screaming for relief in the final regs.

[J Simmons]

(4) Change in coverage under another employer plan. A cafeteria plan

may permit an employee to make a prospective election change that is on

account of and corresponds with a change made under another employer

plan (including a plan of the same employer or of another employer) if--

(i) The other cafeteria plan or qualified benefits plan permits

participants to make an election change that would be permitted under

paragraphs (b) through (g) of this section (disregarding this paragraph

(f)(4)); or

(ii) The cafeteria plan permits participants to make an election for

a period of coverage that is different from the period of coverage under

the other cafeteria plan or qualified benefits plan.

They don't quite fit this situation.

Sorry I'm feeling thickheaded this week but what am I missing for why it doesn't fit? The above quoted regulation does not include any requirement that the child must lose eligiblity in the current plan (which you appear to have added as a requirement in your post yesterday), only a permitted change in coverage in the other plan. If and only if the child was added to the other plan in accordance w/ paragraphs (b) through (g) of 1.125-4, then I read that the employee should be allowed a corresponding change in the current plan. Or please be more detailed about what I'm missing.

Edit: (f)(6) Example 3 supports that loss of eligibility in the current plan is not required for the application of the rule under (f)(4).

What new coverage option is the mother's plan in the OP making available mid-year? None. The same coverages are continued. (f)(6) Example 3 mentions a mid-plan year change of the mother's plan to allow for the first time family coverage (previously employee only). The child's eligiblity based on a move of residence is all. You are conflating the notions of a plan design change in coverage options available with eligibility. Going from non-eligible to eligible under the mother's plan would permit her to add that child under her plan mid-year. It would not allow the father to discontinue mid-year the coverage previously elected for that child for the plan year.

[masteff]

Example 3 uses (f)(3) to illustrate and qualify for (f)(4)'s "election change that would be permitted under paragraphs (b) through (g) of this section (disregarding this paragraph (f)(4))". It could just as easily be any other valid election change reason, not just (f)(3)(iii)'s "Addition or improvement of a benefit package option".

[J Simmons]

Example 3 uses (f)(3) to illustrate and qualify for (f)(4)'s "election change that would be permitted under paragraphs (b) through (g) of this section (disregarding this paragraph (f)(4))". It could just as easily be any other valid election change reason, not just (f)(3)(iii)'s "Addition or improvement of a benefit package option".

And specifically, then, among the (b) through (g) situations (sans (f)(4)) which would apply to the OP situation?

[masteff]

We have insufficient facts because we don't know the child's eligiblity in the mother's plan prior to the move but the most likely would be ©(2)(iv) "Dependent satisfies or ceases to satisfy eligibility requirements". Which is why I've emphasized the word "if" above.

Oh, and see Example 3 under reg section ©...

"(iii) In addition, under paragraph (f)(4) of this section, if F makes an election change to cover G under F’s employer’s plan, then E may make a corresponding change to elect employee-only coverage under P’s cafeteria plan."

EDIT:

Under health care reform, an under age 26 child must be eligible for coverage where ever the child lives. Thus, moving to live with the birth mother would not result in a change in eligibility for the child (under either plan) because, effective January 1, 2011 (assuming a calendar plan year) the child was eligible under both plans.

I think this type of scenario is screaming for relief in the final regs.

Just caught Chaz' post... so child had no change in eliglibility and no other status change reason applies, so no change allowed for the step-father.

But if another reason did apply then (f)(4) would permit the step-father to drop the child.

[Chaz]

We have insufficient facts because we don't know the child's eligiblity in the mother's plan prior to the move but the most likely would be ©(2)(iv) "Dependent satisfies or ceases to satisfy eligibility requirements". Which is why I've emphasized the word "if" above.

Oh, and see Example 3 under reg section ©...

"(iii) In addition, under paragraph (f)(4) of this section, if F makes an election change to cover G under F’s employer’s plan, then E may make a corresponding change to elect employee-only coverage under P’s cafeteria plan."

At the risk of repeating myself, under PPACA, the child, was REQUIRED to be eligible for the mother's plan and the step-mothers plan before, during, and after the move.

[J Simmons]

We have insufficient facts because we don't know the child's eligiblity in the mother's plan prior to the move but the most likely would be ©(2)(iv) "Dependent satisfies or ceases to satisfy eligibility requirements". Which is why I've emphasized the word "if" above.

And the question pertains to the father's plan, and there's been no mid-year cessation or first satisfaction of the eligibility requirements under it. The child was and continues, per the facts given in the OP, eligible under the father's plan.

Oh, and see Example 3 under reg section ©...

"(iii) In addition, under paragraph (f)(4) of this section, if F makes an election change to cover G under F's employer's plan, then E may make a corresponding change to elect employee-only coverage under P's cafeteria plan."

Yes, but (f)(4) is substantively talking about a 'change in coverage' under another employer plan, not a mere change in eligibility. (f)(4) procedurally permits a corresponding change under a plan if the other plan permits a change in election by reason of a ©, (d), (e), (f)(1), (f)(2), (f)(3), (f)(5) or (g) situation, disregarding (f)(4) to avoid a circuity between the two for which none of those situations applies.

(f)(4) is addressing a change of coverage, not mere eligibility. The OP does not fit that. The OP does not fit any of the ©, (d), (e), (f)(1), (f)(2), (f)(3), (f)(5) or (g) situations, either.

[masteff]

At the risk of repeating myself, under PPACA, the child, was REQUIRED to be eligible for the mother's plan and the step-mothers plan before, during, and after the move.

Yeah, your post explaining that got caught in the middle and I missed it.

I'd think until there's regulatory relief then it'll take some sort of court action which would allow the plan to drop the dependent per 1.125-4(d). One question that jumps to mind is whether they have an existing custody agreement which says the parent w/ custody must provide coverage.

And I'll leave the remaining argument about how (f)(4) works for another day.