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Posted

I'm hoping someone can help me solve a disconnect I'm encountering (or at least I think I'm encountering).

Many off-the-shelf cafeteria plan documents that I see from vendors restrict eligible employees to those eligible for the employer's major medical plan. I understand that for certain components (e.g., pre-taxing medical premiums, health FSA, HSA) initial and continuing cafeteria plan eligibility should be tied to medical plan eligibility. 

However, many of those cafeteria plans also cover other benefits, like pre-taxing dental, vision, and other insurance premiums, dependent care FSAs, etc. where the underlying eligibility rules are often different from major medical. This would seem to cause a problem if, for example, an ongoing employee goes from part-time to full-time during an ACA stability period. They may not be eligible for major medical for several more months (or longer), but would often become eligible for other benefits upon converting to full-time status. While the special enrollment rights allow participants to make or change elections, in most documents I have reviewed, the underlying eligibility rules themselves remain the same. In other words, even though the employee would otherwise be allowed to enroll in the other benefits upon converting to full-time, they technically would not be eligible for cafeteria plan participation until they became eligible for major medical. 

Am I missing something that would otherwise make a blanket eligibility statement like this appropriate in these situations?

Thanks in advance. 

Posted

Yes, I agree.  For purposes of the POP component of the Section 125 cafeteria plan, eligibility should be tied to each particular component within the health and welfare plan for which employees contribute on a pre-tax basis.  That way if dental/vision has different eligibility standards than medical (e.g., they don't rely on the look-back measurement method's measurement/stability periods), employees' eligibility to pay for such benefits pre-tax through the cafeteria plan remains unaffected by a change in medical plan eligibility (or vice versa).

It does make sense to tie eligibility to the health FSA component with medical plan eligibility, though.  That is a requirement to preserve excepted benefit status for the health FSA (the so-called "footprint rule" that anyone eligible for the health FSA must also be eligible for the major medical).  So there are situations where that eligibility tie specifically to the medical plan could make sense.

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