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Section 125
posted at 1/25/2012 7:54 PM EST
on Workforce Management
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Posts: 7
First: 11/17/2011 Last: 7/27/2012 |
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? |
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Re: Section 125
posted at 1/26/2012 8:49 AM EST
on Workforce Management
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Posts: 148
First: 9/20/2011 Last: 12/12/2012 |
In Response to Section 125: 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? Posted by JamesPSullivan James- I would have the broker's response checked with another expert. It is my understanding that to be eligible to drop your dependent coverage under a section 125 plan the requirements are: 1. The new plan must have "equivalent" benefits coverage. 2. The new plan must be another "qualified" plan. Individually owned coverage would not meet this requirement. |
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Re: Section 125
posted at 1/26/2012 4:01 PM EST
on Workforce Management
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Posts: 127
First: 9/21/2011 Last: 11/12/2012 |
James, my understanding is the same as Howard's. I had an employee that was trying to get individual coverage for his family because ours had gotten so expensive. He couldn't do it in time. The compromise ended up him having covering but refusing the Section 125 pretax benefits so that gave him the right to cancel at any time during the year. Of course he never cancelled, so he lost out on that amount being pretax to him. But that was a risk he was willing to take. |
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Re: Section 125
posted at 1/27/2012 11:26 AM EST
on Workforce Management
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Posts: 7
First: 11/17/2011 Last: 7/27/2012 |
Thank you both. Unless his wife is approved quickly for the individual plan, he is going to enroll her in both and pay her premium after tax. He will then drop her if she is approved for indidvidual coverage. It is through Kaiser, and it appears to be better coverage at a lower cost than Kaiser through our company. The comparison is apples to apples. Per their employer group benefits summary "Kaiser Permanente plans do not include a pre-existing clause." Still, I'm in disbelief that they would offer a better value outside of an employer group. Is something rotten in the state of Denmark? |
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Re: Section 125
posted at 1/27/2012 12:25 PM EST
on Workforce Management
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Posts: 148
First: 9/20/2011 Last: 12/12/2012 |
In Response to Re: Section 125: Thank you both. Unless his wife is approved quickly for the individual plan, he is going to enroll her in both and pay her premium after tax. He will then drop her if she is approved for indidvidual coverage. It is through Kaiser, and it appears to be better coverage at a lower cost than Kaiser through our company. The comparison is apples to apples. Per their employer group benefits summary "Kaiser Permanente plans do not include a pre-existing clause." Still, I'm in disbelief that they would offer a better value outside of an employer group. Is something rotten in the state of Denmark? Posted by JamesPSullivan Jim-No individual plan can compete with the group plans with no preexisting. If he does choose to opt out make sure you have him sign something that relates to when he can put his spouse back into your plan. There likely would not be a qualifying event so the earliest might be your next open enrollment period. At that point you would be responsible for all preexisting claims. |
Forums » Topic Forums » Benefits & Compensation » Section 125
