Changing Your Election

Introduction

Participants can alter their elections based on change in status events that satisfy the consistency test. These events include legal marital status, dependent changes, employment status shifts, and others. Changes should correspond to factors affecting eligibility for coverage, like family member counts. If health insurance costs increase or decrease, the plan may automatically adjust pretax contributions. Loss or enhancement of coverage can also trigger changes. There's no fixed timeframe, but employers can set limits. Enrollment in a Qualified Health Plan due to specific conditions can also lead to revocations.

When can a participant change their election?

Participants can change elections when they have a change in status and the change meets the consistency test. Change in status events are: 

1. Legal marital status. Events that change an employee's legal marital status, including marriage, death of spouse, divorce, legal separation, and annulment.
2. Number of dependents. Events that change an employee's number of dependents, including birth, death, adoption, and placement for adoption.
3. Employment status. Any of the following events that change the employment status of the employee, the employee's spouse, or the employee's dependent:
   • A termination or commencement of employment
   • A strike or lockout
   • A commencement of or return from an unpaid leave of absence
   • A change in worksite
     In addition, if the eligibility conditions of the cafeteria plan or other employee benefit plan of the employer of the employee, spouse, or dependent depend on the employment status of that individual and there is a change in that individual's employment status with the consequence that the individual becomes (or ceases to be) eligible under the plan, then that change constitutes a change in employment under this paragraph (c).
4. Dependent satisfies or ceases to satisfy eligibility requirements. Events that cause an employee’s dependent to satisfy or cease to satisfy eligibility requirements for coverage on account of attainment of age, student status, or any similar circumstance.
5. Residence. A change in the place of residence of the employee, spouse, or dependent.
6. Adoption assistance. For purposes of adoption assistance provided through a cafeteria plan, the commencement or termination of an adoption proceeding. 

The consistency test must also be met. What is it?

1. Premiums and the Health FSA. An election change satisfies the requirements of this paragraph with respect to accident, health coverage, or group-term life insurance only if the election change is on account of and corresponds with a change in status that affects eligibility for coverage under an employer's plan. A change in status that affects eligibility under an employer's plan includes a change in status that results in an increase or decrease in the number of an employee's family members or dependents who may benefit from coverage under the plan.
2. Dependent Care. An election change also satisfies the requirements of the consistency requirement if the election change is on account of and corresponds with a change in status that effects dependent care expenses, including employment-related expenses.
3. Application of the Consistency Rule. Note the following application:
   • If the change in status is the employee's divorce, annulment, or legal separation from a spouse; the death of a spouse or dependent; or a dependent ceasing to satisfy the eligibility requirements for coverage, an employee's election under the cafeteria plan to cancel accident or health insurance coverage for any individual other than the spouse involved in the divorce, annulment, or legal separation; the deceased spouse or dependent; or the dependent that ceased to satisfy the eligibility requirements for coverage, respectively, fails to correspond with that change in status.
   • If a dependent dies or ceases to satisfy the eligibility requirements for coverage, the employee's election to cancel accident or health coverage for any other dependent, for the employee, or for the employee's spouse fails to correspond with that change in status.
   • If an employee, spouse, or dependent gains eligibility for coverage under a family member plan as a result of a change in marital status or a change in employment status an employee's election under the cafeteria plan to cease or decrease coverage for that individual under the cafeteria plan corresponds with that change in status only if coverage for that individual becomes applicable or is increased under the family member plan. 

If there is a change in the cost of my benefits, can I change my election?

1. Automatic changes for health insurance premiums that are allowed. If the cost of health insurance premiums increases (or decreases) during a period of coverage and, under the terms of the plan, employees are required to make a corresponding change in their payments, the cafeteria plan may, on a reasonable and consistent basis, automatically make a prospective increase (or decrease) in affected employees' pretax contributions for the plan.
2. Significant change in health insurance premiums. If the cost charged to an employee for a health insurance premiums significantly increases (or decreases) during a period of coverage, the cafeteria plan may permit the employee to make a new pretax election. Changes that may be made include:
   • Commencing participation in health insurance for the plan with a decrease in cost.
   • In the case of an increase in cost, revoking an election for that coverage and, in lieu thereof, either receiving coverage under a different health insurance plan providing similar coverage or dropping coverage if no other similar health insurance plan is available.
3. Application to the Dependent Care FSA. Change in cost rules apply in the case of a dependent care only if the cost change is imposed by a dependent care provider who is not a relative of the employee.
4. Application to the Health FSA. No changes are allowed.

What if an employee becomes entitled to Medicare or Medicaid coverage?

If an employee (or an employee's spouse or dependent) becomes entitled to Medicare or Medicaid, the employee can change their premium Cafeteria Plan election.

What if there is a change in the coverage of my benefits, can I change my election?

1. Health insurance premiums when there is a reduction of benefits or loss of coverage. If an employee (or an employee's spouse or dependent) has a significant curtailment of coverage or loss of coverage (such as a significant increase in the deductible, the copay, or the out-of-pocket cost under their health insurance plan), the cafeteria plan may permit any employee who had been participating in the plan and receiving that coverage to revoke his or her election for that coverage and, in lieu thereof, to elect to another health insurance plan providing similar coverage.
2. Health insurance premiums when there is a increase of benefits or another plan added. If a plan adds a new health insurance plan, or if coverage under an existing plan is significantly improved during a period of coverage, the cafeteria plan may permit eligible employees to revoke their election under the cafeteria plan and, in lieu thereof, to make an election on a prospective basis for coverage under the new or improved health insurance plan.
3. Change in health insurance coverage at a spouse’s employer. A cafeteria plan may permit an employee to make a new health insurance election if it corresponds with a change made under another employer plan, if the other plan has a plan year that is different from the employee’s plan.
4. Application to the Dependent Care FSA. The availability of dependent care services from a new child care provider (whether the new provider is a household employee or family member or a person who is independent) is a significant change in coverage similar to a benefit package option becoming available. Because the FSA is a Dependent Care FSA rather than a Health FSA, the coverage rules apply and a cafeteria plan may permit a person to elect to revoke a previous election of coverage under the Dependent Care FSA, and make a corresponding new election to reflect the cost of the new child care provider.
5. Application to the Health FSA. No changes are allowed.

Is there a time after the change of status event when a change in election must be made?

IRS rules do not specify any time after a change of status event occurs when a participant must change their election. However, an employer can set a time limit for when participants must change their elections.

Conditions for revocation due to enrollment in a Qualified Health Plan:

A cafeteria plan may allow an employee to prospectively revoke an election of coverage under a group health plan that is not a health FSA and that provides minimum essential coverage (as defined in § 5000A(f)(1)) provided the following conditions are met:

(1) The employee is eligible for a Special Enrollment Period to enroll in a Qualified Health Plan through a Marketplace pursuant to guidance issued by the Department of Health and Human Services and any other applicable guidance, or the employee seeks to enroll in a Qualified Health Plan through a Marketplace during the Marketplace’s annual open enrollment period; 
(2) The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the employee and any related individuals who cease coverage due to the revocation in a Qualified Health Plan through a Marketplace for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.

A cafeteria plan may rely on the reasonable representation of an employee who has an enrollment opportunity for a Qualified
Health Plan through a Marketplace that the employee and related individuals have enrolled or intend to enroll in a Qualified
Health Plan for new coverage that is effective beginning no later than the day immediately following the last day of the original
coverage that is revoked.