Can an employee that declined coverage during the groups open enrollment period add coverage off cycle, January 1. In other words, does the individual mandate in the ACA constitute a qualifying event?
The answer is no. Neither the availability of health plan coverage through an exchange nor wanting to avoid the individual mandate penalty constitute a change in status event under a §125 plan. As a result, employees would not be permitted to change their salary reduction elections during the plan year in order to enroll in your health plan or to terminate their coverage.
However, at your discretion, the IRS will allow you to amend your written cafeteria plan to permit either or both of the following changes in salary reduction elections:
- An employee who elected to salary reduce through your cafeteria plan for your fiscal plan year beginning in 2013 can be allowed to prospectively revoke or change his or her election once, during that plan year, without regard to whether the employee experienced a change in status event; and
- An employee who did not make a salary reduction election through your cafeteria plan for health plan coverage with a fiscal plan year beginning in 2013 can be allowed to make a prospective salary reduction election for health coverage on or after the first day of the 2013 plan year, without regard to whether the employee experienced a change in status event.
If you want to allow the above election changes, you must amend your §125 plan document to incorporate these rules. Also, you should verify that your insurer or stop loss insurer will allow employees to make a mid-year election change to enroll or drop the coverage under these circumstances.