Section 125

nohr4u1yr

Good morning!

We just finished our open enrollment for health benefits. I had an employee come up to me and ask if somewhere down the road she feels she can't afford her portion of the premium can she drop coverage. Is she able to do so?

juju

Under a Section 125 plan, she can't change her coverage until the next open enrollment unless she has a qualifying event (becomes eligible for other insurance, marriage, divorce, etc). I'm sure you told her this, but even if she could drop it, the cost of premiums can be far less than medical bills should something unforeseen arise.

safety

Where does one find the Section 125 rules, is this on the IRS site?

juju

This should be in the plan documents. My understanding is that since section 125 plans are pre-tax, changes cannot be made without a legitimate reason/qualifying event. The specifics (ex: time limit to make the changes, scheduling of open enrollment) may differ from company to company. The IRS simply requires companies to determine these specifics and stick to them.

I found some Q&As which may help at:
[url]http://www.benefitslink.com/perl/qa.cgi?db=qa_125[/url]

Rockie

You guys are absolutely right about the Section 125. Every year we have people who have put too much money in Section 125 and want to stop it or reduce it, etc. They are very creative when they come up with reasons - they didn't know what they were signing up for...they were "sold" something they didn't need. etc and so on. The bottom line is, the company is held accountable by the IRS in case of an audit.