New IRS Rules Allow Greater Flexibility in Health Plan Choices

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The IRS  has issued cafeteria plan rule changes that allow for greater flexibility regarding participants' health plan choices.

Effective immediately, cafeteria plans connected to group health plans may be amended to allow participants to change their coverage under two new scenarios.

Scenario One:

Should an employee experience a reduction in hours to less than 30 hours per week, but still qualify for coverage under the group health plan, the employee could be permitted to drop their cafeteria plan election.

Should you consider this change?

This change is most applicable to large employers who rely on measurement and stability periods for determining health plan eligibility. You may also consider the change if you offer group health coverage to eligible employees who work below 30 hours per week.

Scenario Two:

Under the new guidance, employees who drop their group health coverage in order to purchase coverage through a Marketplace may be permitted to drop their cafeteria plan election that is attached to the group health plan.

Should you consider this change?

Implementing this new rule is attractive to employers who want to add increased flexibility to their employee's health coverage choices. It's particularly favorable to employers operating with a non-calender cafeteria plan year.

Key Points and Action Items:

These changes are available immediately. These new rules only apply to changes in group health plan coverage under that cafeteria plan. The event described will not permit an employee to alter their FSA election. To activate them you must contact the BPC team to amend your cafeteria plan by the end of the plan year.

To update your plan to reflect these new changes, please contact us at 800-355-2350 or benefitssetup@bpcinc.com.

Posted on September 23, 2014 .