Health Care Reform: Special Rule for Off-Calendar Year Cafeteria Plans
California’s American Health Benefits Exchange, called Covered California, will begin open enrollment on October 1, 2013, with coverage effective on January 1, 2014.
But what about employers with off-calendar year plans? What if an employee elects to drop employer-sponsored coverage mid-plan-year to enroll in one of Covered California’s plans?
Currently, once an employee has made a salary reduction election under a cafeteria plan, that election must generally remain in force for the entire plan year. An exception allows mid-year changes for reasons like a change in status event (marital status, number of dependents, employment status, etc.). However, availability of coverage on the Exchange does not count as a change in status.
So what can employers do? A transition rule now allows employers to amend their cafeteria plans for one year. It applies only to the revocation, modification or commencement of salary reductions for accident and health coverage under an off-calendar year plan.
Large employers may, but are not required to, amend their plans to permit either or both of the following changes in salary reduction elections:
- An employee may revoke prospectively or change his or her election once during the plan year, regardless of whether the employee experienced a change in status event.
- An employee who failed to make an election at open enrollment may make a prospective election during the plan year without regard to whether the employee experienced a change in status event.
Employers wishing to take advantage of this transition rule must amend their cafeteria plans to incorporate these changes. In this case, and this case only, the cafeteria plans may be amended retroactively by December 31, 2014, and become effective retroactively to the first day of the 2013 plan year.