Spousal Surcharge

[waid10]

Hi. We are about to implement a spousal surcharge. The biggest issue that we are looking for guidance is regarding open enrollment periods that don't align. We are unsure how to handle the situation where the employee's spouse's employer's health plan has its open enrollment at a different time of the year than we do.

Here is what we would like to do, if possible: if an employee has a working spouse that elects to be covered on our plan during our open enrollment period, we will apply the surcharge. But if that spouse's employer has open enrollment later in the year, and the spouse wants to drop coverage under our plan, we want to allow that drop of coverage so the spouse can then enter their employer's plan during that employer's open enrollment. We realize that this would not be a traditional event that allows a drop in coverage. But can we allow a drop for this reason? Does the law prevent this?

[Flyboyjohn]

No problem letting the spouse drop coverage under your group health plan at any time for any reason.

Your problem is with your cafeteria POP plan which, as you know, generally does not allow a change in pre-tax premiums mid year except under specific circumstances and the IRS safe harbors don't include the situation you're positing.

Unless you want to go out on a limb with a non-safe harbor "event" I would recommend telling the employees who expect to shift their spouses to the spouse's plan mid-year to not elect pre-tax status for the spouse surcharge.