Q: Is the IRS allowing additional mid-year changes to benefits offered through a Cafeteria Plan (other than FSA) due to the economic impact of COVID-19?

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A: Yes. On May 12, 2020, the IRS announced that an employer is permitted, but not required, to make amendments on a prospective basis for group health coverage in a cafeteria plan for the current plan year only. The approved changes for employees may include:

  • Enrollment for employees who previously declined coverage
  • Change in coverage level (example: self-only coverage to family)
  • Change in plan option previously selected
  • Revoke existing election with a written statement that the individual will immediately enroll in coverage not sponsored by employer

The changes permitted are outlined in IRS Notice 2020-29.

Q: What should employers consider in deciding if they would like to allow the changes?

A: Items that an employer should consider when evaluating the special mid-year changes include:

  • Will health insurance carriers and/or self-insured administrators and stop loss carriers allow the new mid-year changes?
  • Will changes in enrollment levels effect the current premium rates or participation requirements?
  • Understanding the effect on deductibles and co-insurance if an employee changes plan option mid-year.
  • Risk of Adverse Selection if employees all move to a lower level of benefits mid-year.

Q: Do employers have to implement these changes?

A: No. It is up to the employer to decide if they would like to implement all or any of the permitted changes. Employers should work closely with their health insurance broker/consultant when evaluating the changes they would like to implement.

Q: What do employers need to do if they would like to implement any of the new changes into their plans?

A: Employers should contact their broker for guidance and direction in contacting their insurance provider and amending their Plan Document and Summary Plan Description. Employers will need to communicate the changes with participants as soon as a decision is made. The Plan Document must be amended by December 31, 2021.

If you have any questions or would like additional information, please contact your Liberty Advisor.

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