125 Initial elections

[JACKndERISABox]

Is it possible for a plan to provide for both the 30 day retro initial election window and for those who do not make a time election also offer an extended enrollment period for up to, say, an additional 30 days to initially enroll on a prospective basis? Put another way, the plan would provide a 60 day initial enrolment window with those diligent EEs electing to enroll within 30 days of DOH retro coverage to DOH. The rules do not say if this is allowed or if use of the retro option excludes the prospective option. Of course, any such provision would be applicable to all new hires so there should be no discrimination issues involved.  Brian Gilmore any thoughts?

[Brian Gilmore]

Well that's a creative idea to take advantage of the 30-day retro rule and allow some extended time for the stragglers.  I can't think of anything to prevent it.  While I agree there doesn't seem to be anything explicitly blessing it, my take would be that flies under the general 125 election rules.

Where I'm not sure if it would fly is with the carriers and/or stop-loss.  So if you get comfortable with the idea from a 125 perspective (which seems reasonable to me), you'll still want to check with those players as to whether they consider it viable.  It may create some adverse selection issues that concern them.

 

Prop. Treas. Reg. §1.125-2

(d) Optional election for new employees. A cafeteria plan may provide new employees 30 days after their hire date to make elections between cash and qualified benefits. The election is effective as of the employee's hire date. However, salary reduction amounts used to pay for such an election must be from compensation not yet currently available on the date of the election. The written cafeteria plan must provide that any employee who terminates employment and is rehired within 30 days after terminating employment (or who returns to employment following an unpaid leave of absence of less than 30 days) is not a new employee eligible for the election in this paragraph (d).