changing from Part time to Full time

[Guest R Bartels]

Employee is changing from part time to full time.

We offer some part time employees (have to work 25 hours a week) health and dental benefits and it's extremely expensive so most part time don't sign up.

This employee is changing to full time and the employer contribution for health insurance is significant and makes coverage very affordable.

Is this a change in status from a cost of coverage?

[GBurns]

I agree but I do think that you should run it by counsel. The bug is that the employee did decline coverage rather than not being eligible. If it was a change in coverage already elected I see no problem, but this has a twist.

[ForksnKnives]

What does the plan identify as qualifying life events? That's the first place I would look to determine whether the employee can change enrollment mid-year.

[leevena]

Forksnknives is correct. You need to check the plan documents first because there is no requirement that a plan allow for changes. If your plan does allow for these types of changes (costs) then the participant can make the change.

[Chaz]

Even if the plan permits all the election changes that the Code permits, if the employee was eligible for benefits while working part-time, I would hesitate in permitting an election change. The "change in cost" qualified event only applies if the cost charged to the employee for the benefit changes, NOT if it stays the same and just becomes more affordable to the employee.

It is unclear from the original post as to the specific plan design with respect to PT and FT employees, however, so you may want to ask your counsel for more definitive advice.

[leevena]

Even if the plan permits all the election changes that the Code permits, if the employee was eligible for benefits while working part-time, I would hesitate in permitting an election change. The "change in cost" qualified event only applies if the cost charged to the employee for the benefit changes, NOT if it stays the same and just becomes more affordable to the employee.

It is unclear from the original post as to the specific plan design with respect to PT and FT employees, however, so you may want to ask your counsel for more definitive advice.

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Chaz, here is the wording from the law. I admit to not being an expert but it does state that it is allowed in this situation.

Lee

(f) Significant cost or coverage changes— (1) In general. Paragraphs (f)(2) through (5) of this section set forth rules for election changes as a result of changes in cost or coverage. This paragraph (f) does not apply to an election change with respect to a health FSA (or on account of a change in cost or coverage under a health FSA).

(2) Cost changes— (i) Automatic changes. If the cost of a qualified benefits plan increases (or decreases) during a period of coverage and, under the terms of the plan, employees are required to make a corresponding change in their payments, the cafeteria plan may, on a reasonable and consistent basis, automatically make a prospective increase (or decrease) in affected employees' elective contributions for the plan.

(ii) Significant cost changes. If the cost charged to an employee for a benefit package option (as defined in paragraph (i)(2) of this section) significantly increases or significantly decreases during a period of coverage, the cafeteria plan may permit the employee to make a corresponding change in election under the cafeteria plan. Changes that may be made include commencing participation in the cafeteria plan for the option with a decrease in cost, or, in the case of an increase in cost, revoking an election for that coverage and, in lieu thereof, either receiving on a prospective basis coverage under another benefit package option providing similar coverage or dropping coverage if no other benefit package option providing similar coverage is available. For example, if the cost of an indemnity option under an accident or health plan significantly increases during a period of coverage, employees who are covered by the indemnity option may make a corresponding prospective increase in their payments or may instead elect to revoke their election for the indemnity option and, in lieu thereof, elect coverage under another benefit package option including an HMO option (or drop coverage under the accident or health plan if no other benefit package option is offered).

(iii) Application of cost changes. For purposes of paragraphs (f)(2)(i) and (ii) of this section, a cost increase or decrease refers to an increase or decrease in the amount of the elective contributions under the cafeteria plan, whether that increase or decrease results from an action taken by the employee (such as switching between full-time and part-time status) or from an action taken by an employer (such as reducing the amount of employer contributions for a class of employees).

[Chaz]

From my reading of the original post, it appears as if the cost of coverage is not changing, only the employee's ability to pay for it (because he or she is earning more money as a FT employee). Absent different facts, I repeat that I would hesitate in permitting an election change.

If I am mistaken in my interpretation of the facts, and the cost of coverage is in fact changing, the rule leevena cites would apply.

[leevena]

From my reading of the original post, it appears as if the cost of coverage is not changing, only the employee's ability to pay for it (because he or she is earning more money as a FT employee). Absent different facts, I repeat that I would hesitate in permitting an election change.

If I am mistaken in my interpretation of the facts, and the cost of coverage is in fact changing, the rule leevena cites would apply.

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That is a good point you just made. I read the post to say that as a part-timer there was $0 employer contribution and as a full-timer it would be "significant."

If the cost of coverage is not changing, then I would agree with you.

[Guest R Bartels]

Thank you all for the info...

[Guest R Bartels]

For clarification

We contribute 50% of the premium for part time. This comes to $135 a check.

We contribute 93% of the premium for full time. This is $19.53 a check.

He was "eligible" for the insurance at the part time rate, but declined because of the cost.

He's now fulltime and "eligible". I'm thinking it's a change in status because of change in hours.

But not sure...Our plan document does not address status change from part time to full time...

Not sure what to do....

[Chaz]

Off the top of my head, I'm not sure whether the regs actually contemplate this scenario. This seems like a situation where there may be a change in cost. You'll want to check with counsel, though, because (i) even if this otherwise would permit a change under the 125 regs, you still have to go by what the plan document provides and it is unclear to me how the document is worded and (ii) there may be nondiscrimination issues in this plan design.