Written by Natasha L. Rankin, CAE
The IRS issued Notice 2014-55 on September 18, 2014, which expands the permitted election rules for health coverage under a Section 125 cafeteria plan. The notice addresses two specific situations in which a Section 125 cafeteria plan participant is permitted to revoke her/his election during a period of coverage.
- The first situation involves a participating employee whose hours of service are reduced so that the employee is expected to average less than 30 hours of service per week, but for whom the reduction does not affect the eligibility for coverage under the employer’s group health plan.
- The second situation involves an employee participating in an employer’s group health plan who would like to cease coverage under the group health plan and purchase coverage through a competitive marketplace established by ACA, commonly referred to as an Exchange or Marketplace.
The guidance in this notice is effective on September 18, 2014. To allow the new permitted election changes under this notice, a cafeteria plan must be amended to provide for such election changes. The amendment must be adopted on or before the last day of the plan year in which the elections are allowed, and may be effective retroactively to the first day of that plan year, provided that the cafeteria plan operates in accordance with the guideline under this notice and the employer informs participants of the amendment, and provided further that a cafeteria plan may be amended to adopt the new permitted election changes for a plan year that begins in 2014 at any time on or before the last day of the plan year that begins in 2015.
However, in no event may an election to revoke coverage on a retroactive basis be allowed.
Information provided courtesy of the Employers Council on Flexible Compensation (ECFC), of which Glynn Griffing & Associates, Administrators is a proud member.
 Natasha L. Rankin, CAE is the Executive Director of the Employers Council on Flexible Compensation