Section 125 plan - cash - usable to purchase insurance on the exchange?

[Belgarath]

Is it ok for participants to take a cash option from a Cafeteria Plan that is taxed as regular income, and use that money to go to the Exchange and purchase health insurance on their own? I'm thinking it is ok, but I'm having a hard time "proving" it to myself. All the FAQ's/guidance is rather confusing. It seems to me that an insurance purchased on the Exchange isn't an "individual health insurance policy" for purposes of the guidance?

[jsb]

Sure, why not? Once the money is paid to the employee as taxable income it's just income; the employee is free to do whatever they choose with it including purchasing hockey tickets ... or a sofa ... or exchange coverage ...

[GBurns]

It might depend on the size of the employer and the wording of the cash option.

State small group/employer health insurance law might prohibit reimbursement directly or indirectly, in any form, which means that there must be no wording that connects the cash out to the purchase.

The same applies under ACA.

[Belgarath]

Thanks.