New Cafeteria Plan Election Rules and PCORI Fee
Recently, the IRS issued guidance which expands the election rules for health coverage under a Section 125 Cafeteria Plan. In particular, Notice 2014-55 addresses two specific situations in which a Participant is permitted to revoke her/his election during a period of coverage (i.e. Plan year) in order to purchase a “qualified” health plan through a Marketplace.* In the first scenario, an employee’s hours of service are reduced, but the employer allows coverage under the group health plan to continue. In the second, an employee is purchasing Marketplace coverage during a special enrollment period or open enrollment period.
Prospective revocation is allowed provided that the following conditions are met:
Reduction in Hours
- The employee has been in an employment status under which he/she was expected to average at least 30 hours of service per week. Subsequently, per a change in status the employee is reasonably expected to average fewer than 30 hours of service per week (even if that reduction does not result in the employee ceasing to be eligible under the group health plan**); and
- The revocation of the election of coverage under the group health plan corresponds to the employee’s intended enrollment in another plan that provides minimum essential coverage. The new coverage is effective no later than the first day of the second month following the date the original coverage is revoked.
Enrollment in a Qualified Health Plan***
- The employee is eligible for a Special Enrollment Period or seeks to enroll in a Qualified Health Plan through a Marketplace during the annual open enrollment period; and
- The revocation of the election of coverage under the group health plan corresponds to the employee’s intended enrollment in a Qualified Health Plan through a Marketplace for new coverage. The new coverage is effective no later than the day immediately following the last day of the original coverage that is revoked.
This guidance—effective as of September 18, 2014—does not apply to the health FSAs.
To allow the new permitted election changes under this notice, the cafeteria plan must be amended AND the employer must inform Participants of the amendment. As always, TASC has you covered.
AND, IN OTHER (IRS) NEWS… The agency also recently announced an adjustment in the Patient Centered Outcomes Research Institute (PCORI) fee. According to Notice 2014-56, the dollar amount will increase from $2.00 to $2.08 (per covered life) for Plan years ending on or after October 1, 2014 and before October, 1 2015.
* The federally-facilitated or state-based entities formerly known as “health insurance exchanges.”
** Typically will occur under certain plan designs intended to satisfy PPACA’s employer mandate and to avoid any potential pay-or-play penalties.
*** A health insurance policy sold through the Marketplace; PPACA requires certification that these health plans meet minimum standards contained within the law.
