There is always one employee who misses the open enrollment deadline and needs to make a change. What can be done?
Question: Company’s open enrollment closed last week, buy the plan year doesn’t start until July 1. An employee says she missed the OE deadline by mistake but needs to change her medical election. Can the employee change her medical election before the plan year starts—even though OE has closed?
Compliance Team Answer:
As described below, the company can permit an exception here if it is comfortable with establishing a precedent to allow employees to change their elections after OE ends (but before the period of coverage begins).
No Section 125 Cafeteria Plan Issue
In most cases, the main concern with election deadlines is ensuring compliance with the Section 125 cafeteria plan regulations. Fortunately, this is not a Section 125 permitted election change event issue because the request does not relate to a mid-year election change. An election change is mid-year only if it occurs after the period of coverage begins (as of 7/1), which has not occurred yet here.
In this case, the employee would like to change an election post-OE but pre-period of coverage. This is not an issue under Section 125. Those rules require that the election be made prior to start of the period of coverage (7/1) and be irrevocable for the duration of the period of coverage unless the employee experiences a permitted election change event. Allowing elections for the 7/1 plan year all the way up to 6/30 would therefore be permitted by Section 125.
Administrative Reason for OE Ending Prior to Period of Coverage
The main reason for employers structuring OE to end a set period in advance of the period of coverage beginning is an administrative one. If employees were able to make elections all the way up to 6/30, it would be very difficult to implement their election prior to the period of coverage.
If the company were to permit the employee to change elections after the company’s OE closes to account for the employee’s alleged failure to remember the deadline, it would create an ERISA plan precedent. This would require the company to provide the same opportunity to other employees in a similar scenario who request a post-OE but pre-plan year election change.
The company has two options:
- Enforce the end of OE as a hard deadline after which no employees may change their elections without experiencing a permitted election change event.
- Permit the election change because the plan year has not yet started. If the company decides to permit this post-OE election change, our recommendation is that the company come up with some hard outer limit where they won’t accept any other post-OE election changes (regardless of the circumstances) to make sure all elections for 7/1 can be timely implemented (e.g., a week in advance of the period of coverage).
About the author
Lead Benefits Counsel
Brian Gilmore is the Lead Benefits Counsel at Newfront. He assists clients on a wide variety of employee benefits compliance issues. The primary areas of his practice include ERISA, ACA, COBRA, HIPAA, Section 125 Cafeteria Plans, and 401(k) plans. Brian also presents regularly at trade events and in webinars on current hot topics in employee benefits law. Connect with Brian on LinkedIn.
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