IRS Revises Guidance to Allow Expanded Mid-Year Cafeteria Plan Election Changes - Bim Group

IRS Revises Guidance to Allow Expanded Mid-Year Cafeteria Plan Election Changes

READ TIME: 3 MINUTES

The IRS recently released revised guidance to permit employers to amend their cafeteria plans to allow mid-year election changes when an individual related to a plan participant is eligible to elect a qualified health plan on the Marketplace due to either a special enrollment period or during the Marketplace’s annual open enrollment period. Longstanding guidance had allowed such changes relating to covered employees, but recent legislation to address the so-called family glitch required the expanded guidance to permit changes when related individuals choose Marketplace coverage independent of the covered employee.

As with standard permitted election changes, any change for dependent Marketplace eligibility must correspond to the intended Marketplace enrollment. Moreover, any permitted change may be made only prospectively for coverage beginning no later than the day immediately following the last day of the revoked coverage. For example, a participant may revoke family coverage and switch to a different coverage tier to account for a family member (or multiple family members) choosing Marketplace coverage but would not be permitted to make changes that did not relate to the change in number of covered dependents.

Plans are not required to receive any formal written proof of Marketplace coverage. Rather, the IRS will permit plans to rely on an affected individual’s reasonable representation that they have elected, or intend to elect, Marketplace coverage.

Plan sponsors do not have to allow election changes under the new guidance. However, plans that choose to permit such changes may do so for elections effective on or after January 1, 2023. A plan may be amended retroactively by the last date of the year in which the amendment is effective as long as the plan has continuously operated according to the amendment and participants have been informed of the change. Additionally, specifically for plan years that begin during 2023, plans may be amended by the end of the 2024 plan year.

 

 

This information has been prepared for UBA by Fisher & Phillips LLP. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.

Recent Insights

January 30, 2023
HR Elements

HR Elements: Workplace Culture | Why Best Friends Have Benefits at Work

READ TIME: 3 MINUTES You likely remember your first work friend. They showed you the ropes and helped you navigate office politics. Today, research shows that work best friends are not just nice to have, but also play an essential role in employee engagement and retention. Fostering a buddy-friendly environment can reap benefits in many […]
Read more
January 26, 2023
Compliance Alert, DOL

DOL Announces 2023 Penalties for Health & Welfare Plan Compliance Errors

READ TIME: 4 MINUTES Since 2015, federal agencies have been required to annually review the laws and regulations they enforce to adjust applicable penalties for inflation. These adjustments, or so the theory goes, provide higher incentives for plan sponsors to ensure their benefit plans and programs remain compliant. Specifically, the U.S. Department of Labor (DOL) […]
Read more
January 18, 2023
Webinar

Webinar: Shedding Light on Qualifying Events and Special Enrollment Periods

Tuesday, February 14, 2023 1 – 2PM CST Register Now Attend this month’s webinar to learn how, when, and why the Internal Revenue Service allows an employee to make midyear election changes. Gain insights into: Section 125 irrevocable plan elections Which family members are impacted by permitted changes, and the “family glitch” Common HR errors […]
Read more
January 18, 2023
News

IRS Grants Permanent 30-Day Extension to Providing Individual ACA Statements

READ TIME: 4 MINUTES ‘Tis the season for applicable large employers (ALEs) to scramble to meet their Affordable Care Act (ACA) obligation to provide full-time employees with individual statements that provide group health coverage information required to be filed with the IRS on Form 1095-C. Although the ACA generally requires ALEs to furnish individual statements […]
Read more