IRS Allows Additional Election Changes for Health Coverage Under Cafeteria Plans

The IRS has expanded its mid-year election change rules to permit two additional situations in which participants can drop their employer’s health plan coverage. As of September 18, 2014, Cafeteria Plans (or Section 125 Plans) may be amended so that employees are permitted to drop their group health coverage in the following situations:

Reduction in hours

Employees expected to work an average of 30 hours per week may drop health coverage mid-year if his/her status changes to average less than 30 hours per week. This new mid-year election change event is available even if the reduction in hours does not result in loss of eligibility for the employee’s current plan. The new coverage must be effective no later than the first day of the second month following the month in the employee’s employer-sponsored health benefits are dropped. Employers may rely on an employee’s reasonable representation about the intended enrollment in another plan.

Enrollment in Exchange Coverage

Employees eligible to enroll in Federal or State Exchange coverage during a special or open enrollment period may drop their employer’s group health benefits midyear. The termination of coverage must correspond to the employee’s intended enrollment in Exchange coverage and the Exchange benefits must be effective the day after the group health benefits cease. Employers may rely on an employee’s reasonable representation about the intended enrollment in Exchange coverage.


Please note that the information contained in this document is designed to provide authoritative and accurate information, in regard to the subject matter covered. However, it is not provided as legal or tax advice and no representation is made as to the sufficiency for your specific company’s needs. This document should be reviewed by your legal counsel or tax consultant before use.

Additionally, the messages and content within the Pittsburgh Health Care Reform group do not reflect the advisory services of Henderson Brothers, Inc.