Individual Dental insurance under Cafeteria Plan

[Belgarath]

Is it allowable for an employee to purchase an individual dental insurance policy through a cafeteria plan? I'm having a hard time finding clear guidance on this question. Any cites, if you happen to have them, would be great! Thanks.

I'm attending a cafeteria plan seminar in May, which will hopefully help to educate me so I won't have to ask quite as many stupid questions.

[KJohnson]

Always issues in offering individual coverage.  First 125 plan has to provide for it.  Second the dental would have to be an excepted benefit under HIPAA/ACA (probably is).  If it was not then you may have employer payment plan issues.  See e.g. Notice 2015-87, ACA FAQs Part XXII.   Third offering it through a 125 plan arguably takes it out of voluntary benefits exemption form ERISA so there could be ERISA issues (plan document SPD).  Finally also a question of whether this is now part of group coverage and covered by COBRA. (How do you offer COBRA for an individual policy?)

[Belgarath]

Thanks KJ. Let's assume that the plan document allows it. It SEEMS like it qualifies as an excepted benefit. Yes, there would be plan document, SPD, etc.

What is the argument for possibly considering that this is part of a group policy? The whole point of this is that the employer doesn't offer dental coverage, so employee would purchase an individual policy - they would just want to offer the option to have this on a pre-tax basis for premiums through a cafeteria plan, if allowable. 

I haven't really found one thing directly on point for this specific question. This makes me nervous, because it seems like I can't be the only person in the world who has asked this question.

Anyway, thanks again for your response!!

[KJohnson]

I think the reasoning would be it is an employer payment plan.  But its an employer payment plan for excepted benefits--so no ACA issues.  The guidance on employer payment plans, however, says that the employer payment plan itself (i.e. reimbursing for individual policies) is  a group health plan   IRS Notice 2013-54, and DOL Tech. Rel. 2013-03.  And, if it is a group health plan then COBRA applies.  Just saying what the reasoning might be--not whether it is wrong or right.

[hr for me]

Is that employee an HCE? If so, you might have nondiscrimination issues anyway.

Logistically, even if allowed, it  would probably cost the same (or more) in fees and administration as having a small group dental plan open to all employees with the same policy.  Like someone above said, you still need  a plan, SPD, etc.

What happens when another employee hears about it and wants the same choice?  Are you really going to want to administer a lot of payroll deductions to a bunch of different dental providers each payroll period with different plan benefits? From a payroll side, this could get to be a nightmare.

 

[Belgarath]

T'isn't even a plan. A broker who does some 401(k) business with us asked this question, so I was just looking to help out the broker with some sort of reasonable answer. My thanks to you all for your input!