Coverage period not calendar year

[BonoConsilio]

Can anyone point me to a regulation regarding the beginning and ending of a coverage period for a health plan that does not coincide with a calendar year?

A local school district has a coverage period beginning 9/1 and ending 8/31. How normal/common is it to use a coverage period that does not coincide with a calendar year? This is the first time for me to come across this.

[Lou S.]

I think it is rather common to have a non-calendar year coverage period.

Is your question about coverage on 1/1/14 and the individual mandate of ACA? If so there is a transition notice. http://www.irs.gov/pub/irs-drop/n-13-42.pdf

[BonoConsilio]

Ok, thanks, Lou. And I thnk you mean "normal", not necessarily "common", no? Even if standard coverage over a non-calendar year is permissible, I would anticipate that to be a normal exception, not a common feature.

No, it doesn't have anything to do with ACA. I am curious why a plan would elect coverage over a non-calendar year. That makes it difficult for an EE to switch to an EE's spouse's coverage at another ER, with coverage which does follow a calendar year.

[Lou S.]

Ok, thanks, Lou. And I thnk you mean "normal", not necessarily "common", no? Even if standard coverage over a non-calendar year is permissible, I would anticipate that to be a normal exception, not a common feature.

No, it doesn't have anything to do with ACA. I am curious why a plan would elect coverage over a non-calendar year. That makes it difficult for an EE to switch to an EE's spouse's coverage at another ER, with coverage which does follow a calendar year.

Yeah normal is probably a better term.

For a school district I can see the 9/1 - 8/31 making perfect sense for them as an employer. As to why other do it I'm not sure as I don't work with health plans but it is normal for retirement plans who want plan year and fiscal year to coincide for deduction reasons.

[GMK]

One reason to have a non-calendar year health plan is to avoid the crowd that renews on January 1 and the associated delays in getting responses, etc., because everyone is asking about their renewals at that time.

[GBurns]

It is both normal and common to have the plan year as non-calendar. However, the Medical FSA and DCFSA are still calendar year.

[jsb]

I suspect a big reason for a non-calendar year cycle is to follow the entity's fiscal year. That's why we do it. Much easier for budgeting purposes when you are not trying to predict what your health plan rates might change to in the middle of your fiscal year.

On Bono's other point, there really shouldn't be much challenge with changing mid-year to a spouse's plan because of their open enrollment period. Acquiring coverage through a spouse's health plan, even during open enrollment, would be a qualifying event that would permit an election change. As long as the "losing" plan is permissive regarding IRS election change rules, the employee can be allowed to drop their coverage upon gaining coverage under another plan.

A non-calendar year 125 FSA plan for Medical and Dependent Care FSAs is no doubt less common, but permissible. You just need to make sure that actual deductions occurring during any calendar year do not exceed the applicable IRS limits.