medical benefits

spring

looking for information on "qualifying event" before employee can cancel a coverage mid-term that they don't want. Example: open enrollment - employee signs up for benefit, but doesn't decide before it takes effect, that they can't afford it for year and now they want out. Why does there have to be a "qualifying event" in order for them to cancel? Look forward to your response and/or direction.

NaeNae55

Is this strictly a medical plan, or are we talking a medical/flexible spending plan (Section 125)?

It is my understanding that unless you have a state law, a specific policy stating your election can't be changed during the year, or it is written the in the health plan policy itself, an employee can drop their health coverage at any time. However, if you also have an FSA then you must have a qualifying event. If not, then the employee can drop the health coverage but still have to pay the premium payments (stupid, huh?).

Per the IRS, qualifying events for an FSA include: Change in legal marital status, change in number of dependents, change in employement status (spouse or EE loses job or has reduction in hours), change in dependent eligibility (ie: they get too old to be covered), or a change in residence that affects coverage (spouse moves out of state and your policy doesn't cover that state so spouse can't be covered under your plan).

Deciding you can't afford it is not a qualifying event.

Good luck!

Nae

irenesmsaclaims

First of all, let's not call this a "qualifying event". That is COBRA terminology. If it's a cafeteria plan, then it's a "qualified family status" change. FSA is the medical spending part of a cafeteria plan. If you are talking about insured medical insurance coverage, then it's the "premium only" part of the cafeteria plan, not the medical spending part (FSA). The reason an employee cannot change or drop coverage after enrollment in the "premium only" part or any other part is because it could cause the plan to be disqualified for everyone, the entire plan. This is because these plans are tax-qualified under the IRS Code, meaning the contributions are tax- free.

There is nothing in the code that says that if you correctly (within the rules) drop the insured medical coverage (POP) that you still have to pay the premiums. Terminology seems to get people extremely confused. If you correctly drop the FSA part, you do not have to continue to make contributions.

There are basically three parts to a Section 25 plan, the medical spending plan, or flexible spending plan, (FSA); the dependent care plan; and the premium-only plan (for insured coverage).

I know of no state laws that supercede these IRS rules regarding cafeteria (Section 25) plans.

E Wart

First, are you talking about the "limitations/requirements" under the 125/POP Plan (Premium Only Plan) or what.
If you will pull your POP or your Wrap Document (you will probably have 2 different documents) and read them, they will explain what is allowed for a change of coverage and when. (It took me forever to locate ours... so if you don't know where yours is, call your broker and ask them if they have a copy.)
If you aren't talking about the 125 Plan, please be specific as to what you mean.
E Wart

irenesmsaclaims

Sorry, I meant to type Section 125, not Section 25.