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One of our new employees is eligible to enroll in health insurance February 1. Our company pays the employee premium only, while the employees pay for dependents. He will enroll himself in our group insurance, but is undecided about his spouse. He is weighing the options of adding his spouse to the insurance offered through our company v. enrolling his spouse in individual (non-employer group insurance). He has found, what appears to be a better value for his spouse (even considering his tax savings through our Section 125 plan) with individual insurance. February 1 is fast approaching and it will take 15 days for his wife to be approved by the carrier offering individual non-employer insurance. Since there is no guarantee that she will be accepted, he wants to enroll her through our company, and pay the premium pre-tax through our Sec. 125 plan. If approved, he would drop his spouse through our company’s insurance and stop his pre-tax paycheck deferrals.
Is this allowable under Section 125 rules? Our plan document is clear as mud to me. I spoke with our broker for the Section 125 plan. She said not to worry -- obtaining individual non-employer coverage would satisfy the qualifying event rule for a Section 125 plan. Is she right?