Reminder: Mid-Year Cafeteria Plan Changes for ACA

May 2014Articles For Your Benefit

Generally, cafeteria plans may not be amended retroactively. However, the IRS provided an exception last year to coordinate with the individual mandate required under the Affordable Care Act (ACA).

As most people know, ACA requires all individuals to have health insurance beginning this year (2014) or pay a penalty tax. In order to assist individuals in satisfying this requirement, the IRS is allowing employers to amend their cafeteria plan to permit employees to make special one-time, mid-year election changes without incurring an event that would otherwise be deemed a “qualifying event” triggering the right to make such a change. Employers are not required to amend their cafeteria plan for this. Further, and as noted above, employers may do so by retroactively adopting an amendment no later than December 31, 2014, so long as such amendment is effective the first day of the plan year beginning in 2013.

The amendment may include one or both of the following options: (1) employees who did not make an election at the beginning of the most recent plan year may now change their election to enroll in the group health plan coverage offered through the cafeteria plan; and/or (2) employees who did elect coverage under the group health plan offered through the cafeteria plan may modify their current election to either cancel or change their coverage selection.

Accordingly, if your cafeteria plan has allowed employees to make mid-year election changes relative to the ACA mandate, it is imperative that your cafeteria plan be amended to reflect such operation.

For more information regarding this topic, please contact Seth I. Corbin at (412) 394-5530 or [email protected] or any member of the Fox Rothschild LLP Employee Benefits & Compensation Planning Practice Group.