Premium Only Plan

[Guest farrah]

My company is starting a POP Section 125 in January. I was told that, in a POP, employees can make changes to their health coverages anytime during the year without a qualifying event provided the health plan provider does not have restrictions. The only time a qualifying event is needed is in a reimbursing account. This doesn't sound right to me. Is this correct?

[KIP KRAUS]

Your right, not only does it not sound right, it isn't right. If an employee enrolls in the Section 125 plan, he/she can only make changes when there is a change in family status or any other change authorized by Section 125. This applies to POPs as well as flexable spending accounts.

[QDROphile]

Not so fast. An employee can change medical coverage. The employee cannot change the election to have premiums paid out of pre-tax pay unless the employee has a status change. So if an employee changes mid-year to a more expensive medical coverage, the employee cannot increase the salary election to increase pre-tax payment of premium, but the employee can change coverage. The increase in premium can come from after tax pay. All of this increases complexity of the plan, but it is not prohibited.

[Guest kp]

Do you have some basis in your assertion about changing medical coverage? Are you saying an employee can go to more expensive coverage by making it up in after tax payments? Could the employee argue that the more expensive coverage offers more options than the old coverage, and that permits the change?

[Guest Penn]

What we forget is that technically ees can change their medical/dental/whatever (although we need to be careful that the insurance company will go for that) options mid-year but they cannot change their pre-tax contributions. For example, ee separates from spouse, wants to harm spouse, drops spouse from coverage. Employer would still take the deductions as though spouse were on the plan.

That said, I think most of us write policies and procedures so that we don't have people making coverage changes mid-year; we tend to require that coverage changes on the med/dent/whatever have to have family status changes, too. If we don't, what an administrative nightmare!