July 21, 2022
Offering benefits to employees on a pre-tax basis is only allowed under a Section 125 plan, and those rules limit when employees may change their annual elections. Join us for a brief refresher of the qualifying event rules '” both mandatory and permissible. We'll also discuss common employer pitfalls and practical implications of administering qualifying events.
Agenda
- Review of Election Rules
- Qualifying Events
- HIPAA Special Enrollment Rights
- IRS Permissible Qualifying Events
- Administration of Mid-year Election Changes
- Common Pitfalls
What is Section 125?
- Section of the Internal Revenue Code
- The reason that employee contributions to the cost of coverage is tax advantaged
- Because of the tax advantages for both employers and employees, the following conditions must be satisfied:
- Written Section 125 Plan Document
- Eligibility, contributions, and benefits must not be discriminatory
- Irrevocable Coverage Rule- employee elections cannot be changed mid-year without a qualifying event
Consequences of Noncompliance
Failure to satisfy those conditions can result in:
- Invalidation of the entire cafeteria plan. All employee contributions would be taxable for the employer and employees
- Possible tax penalties for failure to properly withhold taxes and report income
- Risk of legal action for not operating the plan in accordance with the law and plan document