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Section 125 Permitted Election Changes beyond 30 days


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Other than SEPs (Medicaid/Chip), do you allow any PECs for adding a newborn beyond 30 days?  I haven't gotten this question in a while but we have a plan with two requests - one parent was admitted to an inpatient mental health facility right after the birth and one reportedly couldn't access the enrollment system (yet to be verified).

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These are always unfortunate situations.  For a while we could rely on the Outbreak Period extensions, but the last day to enroll using those extensions for a HIPAA special enrollment period (including birth/adoption) was August 9, 2023.

So now we're back to the general rules that applied pre-pandemic.  A late enrollment exception typically will not be viable for multiple reasons.  The main concerns are:

  1. The Section 125 Cafeteria Plan Rules;
  2. The Insurance Carrier (or Stop-Loss) Limitations; and
  3. The ERISA Duty to Follow Plan Terms and Plan Precedent.

Sometimes employers mistakenly think just getting a carrier exception will solve all their concerns, but that would be a major mistake.

There is a very rare situation where it might be appropriate to consider the informal IRS "doctrine of mistake" if there was truly a systems limitation that prevented the enrollment.  That requires "clear and convincing evidence," which is a very high bar to meet.  Typically employees are just grasping for something to facilitate the late enrollment without their actually being clear and convincing evidence of a systems error.  Even if there is an argument of meeting that standard, you would still need carrier (or stop-loss approval) to permit the late enrollment.


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