Participant elections under a cafeteria must be made before the first day of the plan year or the date taxable benefits would currently be available, whichever comes first. This means that participants ordinarily cannot make changes to their cafeteria plan elections during a plan year.
Employers do no have to permit any exceptions to the election irrevocability rule for cafeteria plans. However, IRS regulations allow employers to design cafeteria plans permitting employees to change their elections during the plan year, if certain conditions are met. The IRS regulations list the permitted election change events that may be cause for a mid-year election change.
This Legislative Brief provides an overview of the IRS’ permitted election change events. It also includes information on the transition relief available to an employer with a cafeteria plan that has a non-calendar year plan year beginning in 2013. This transition relief was made available due to the Affordable Care Act (ACA) changes that became effective on January 1, 2014.
- Cafeteria plans may recognize certain events as entitling a plan participant to change his or her elections (if the change is consistent with the event). A cafeteria plan may not be more generous than the IRS permits, but it may choose to limit to a greater extent the election change that it will recognize.
- If a cafeteria plan incorporates one or more of the change in status rules, an employee who experiences a change in status is permitted to revoke an existing election. He or she may make a new election consistent with the event for the remaining portion of the period of coverage, but only with respect to cash or other taxable benefits that are not yet currently available.
- Only an employee of the employer sponsoring a cafeteria plan is allowed to make, revoke or change elections in the employer’s cafeteria plan. The employee’s spouse, dependent or any other individual other than the employee may not make, revoke or change elections under the plan.
- A cafeteria plan sponsor that recognizes one or more mid-year election change events provided for in the IRS regulations should review its plan document to confirm it includes the permitted election changes.
To read more about permitted election change events, and ACA transition relief as it pertains to cafeteria plans, click here. If you have any questions, contact our Alltrust experts at 727.772.4200.