Proposed Changes to Cafeteria Premium Only Plan Elections & Look-Back Period
PROPOSED CHANGES TO CAFETERIA PREMIUM ONLY PLAN ELECTIONS & LOOK-BACK PERIOD
In September the IRS issued two notices regarding the Affordable Care Act.
Notice 2014-49 describes a proposed approach for applying the look-back measurement method used to determine full-time employee status for purposes of IRS Code § 4980H in situations when the measurement period applying to an employee changes. This change may occur because the employee transfers within the same applicable large employer (or within the same applicable large employer member) from a position to which one measurement period applies to a position to which a different measurement period applies. This situation may also arise when the applicable large employer member modifies the measurement period applicable to a position.
Notice 2014-55 expands the application of the permitted change rules for health coverage under a § 125 cafeteria plan. This notice addresses two specific situations in which a cafeteria plan participant may wish to revoke, during a period of coverage (commonly a plan year), the employee’s election for employer-sponsored health coverage under the cafeteria plan in order to purchase a Qualified Health Plan through an ACA Marketplace. The first situation involves a participating employee whose hours of service are reduced so that the employee is expected to average less than 30 hours of service per week but for whom the reduction does not affect the eligibility for coverage under the employer’s group health plan. (This may occur, for example, under certain employer plan designs intended to avoid any potential assessable payment under § 4980H of the Internal Revenue Code.) The second situation involves an employee participating in an employer’s group health plan who would like to cease coverage under the group health plan and purchase coverage through a Marketplace without that resulting either in a period of duplicate coverage under the employer’s group health plan and the coverage purchased through a Marketplace or in a period of no coverage.
This notice permits a cafeteria plan to allow an employee to revoke his or her election under the cafeteria plan for coverage under the employer’s group health plan (other than a flexible spending arrangement) during a period of coverage in each of those situations provided specified conditions are met. The Treasury Department and the IRS intend to modify the regulations under § 125.