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Cafeteria Plans: Mid-Year Election Changes

In general, participants cannot make changes to their cafeteria plan elections during the plan year.However, the Internal Revenue Service (IRS) allows plan sponsors to permit mid-year plan changes under certain circumstances, such as a change in employment status, marriage or birth of a child. If a plan allows for mid-year election changes, it must comply with the IRS regulations governing these changes. In other words, the plan may not allow more mid-year election changes than are permitted by the IRS.

If the plan permits mid-year plan changes, an employee who experiences a change in status may revoke the existing election and make a new election for the remainder of the coverage period so long as it is consistent with the event causing the change in status.

On September 18, 2014, the IRS issued Notice 2014-55 expanding the rules relating to mid-year cafeteria plan election changes. Under the expanded rules, a participant may revoke an election in the following circumstances:

  • An employee who is treated as a full-time employee for a stability period under the look-back measurement method and who experiences a reduction in hours of service below 30 hours per week during the stability period wants to enroll in another group health plan or an Exchange plan, or
  • An employee is eligible to enroll in Exchange coverage.

A sponsor wishing to adopt these changes must amend their cafeteria plan on or before the last day of the plan year in which the changes are allowed. Additional information on these new rules is available in our October 2014 Briefing linked below.

Additional Information

New Cafeteria Plan Election Changes
     This Briefing outlines new guidance issued by the IRS allowing for mid-year cafeteria plan election changes.