paying for premiums after-tax

[pcbenefits007]

I have a client who wants to implement a policy mid-year by where participants can elect to waive their salary reduction for premiums on a pre-tax basis and re-characterize it to after-tax.

Won't the employer lose their FICA/FUCA savings?

The salary reduction is to be in place for the entire Plan Year - allowing them to waive it mid year violates this correct?

Any other issues you guys see?

Thanks!

[Chaz]

Why does the employer want to do this?

[pcbenefits007]

I have no idea why they're thinking about doing this at this time. Their account rep just asked us it it's allowed.

[masteff]

Point them to the Section 125 rules on permitted changes. Explain the rules come from the government, it's not merely something written in the plan documents. If necessary, explain the potential consequence of violating Section 125 is causing every deduction under the 125 plan for every employee to become after-tax, retroactive to the first of the year, plus penalties.

[Flyboyjohn]

Another possibility is the employer was not offering a group health insurance plan but instead was reimbusing employees for individual premiums on a pre-tax basis and is scared of the $100/day ($36,500/year) per particpant penalty so they want to amend their errant ways.

[Clarifying Health]

I agree with others - that clarification is needed. Is it currently a group health insurance policy or reimbursement of individual health insurance premiums?