Changing elections
Can employers allow participants to change their enrollment elections during this COVID-19 pandemic (e.g., add coverage, drop coverage, change plan options)?
Yes, if an employer’s existing mid-year status change rules permit this type of change. Some common mid-year status change rules that might apply during this crisis:
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Employee starts unpaid LOA, resulting in loss of eligibility
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Change in employee work schedule, resulting in loss of employee benefit coverage
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Change in spouse or dependent work schedule, resulting in loss of benefit coverage in another employer's plan (e.g., participant waived coverage under employer’s plan and is now losing eligibility under a spouse’s plan)
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Reduction in hours under certain conditions as specified by IRS Notice 2014-55
If an employer’s current mid-year status change rules would not permit a change in coverage, employers should work with their legal counsel to determine what provisional changes are required to allow changes.
Have there been any new regulatory announcements or guidance that would allow participants to make additional changes to their benefits?
At this time, there has not been any new guidance or announced exceptions to the current mid-year status change rules such as Section 125 allowable changes and required HIPAA Special Enrollments. Alight will continue to monitor the situation and provide additional information if and when it becomes available.
Can participants change their Dependent Care flexible spending account (FSA) elections if they are no longer using their childcare providers (e.g., day care centers closed)?
Existing rules permit election changes when there is a change in cost of coverage and/or a change in provider. Also, IRS officials have informally commented (Harry Beker, IRS, Office of Chief Counsel, Aug. 17, 2001, ECFC Annual Symposium) that a dependent care FSA election change may be permitted if a child is switched from a paid provider to free care or no care. Alight’s interpretation is that closure of a day care center regardless of whether a child is switched to another day care center or other paid provider, would constitute a change in provider and/or a change in cost, permitting an election change under the existing rules.
Should employers that require documentation as part of their Qualified Status Change processing make any special allowances?
During this COVID-19 pandemic, employers may want to consider suspending any documentation requirements for quicker processing of enrollment changes, and because it might be difficult for participants to obtain the documentation needed during this time.
What happens if a participant’s paycheck can no longer cover their benefit deductions?
Employers should review their mid-year change in status rules to determine if any can be used to allow participants to drop coverage as needed. Employers should talk to their legal counsel about any other actions they may consider to immediately respond to the COVID-19 crisis, such as suspending deductions. While there may be additional flexibility granted at some point in the future, as of now, the elections and any mid-year changes should be handled under the existing rules.