FSA/POP Rule Change: Individual Open Enrollment • October, 2014

Additional Permitted Election Change: The IRS has outlined an additional circumstance in which an employee can terminate group health coverage (outside the “change in family status” or your group plan’s open enrollment). However, in order to have this option available to your employees, you must amend your Flexible Spending Account (FSA) or Premium Only Plan (POP) contract.

Who should amend their contract? If your medical plan renews on any month other than January 1st or February 1st, you may want to add this new provision.

Dropping Group Coverage
In some cases, an employee may want to move from your group-based medical plan to an individual medical plan. This is common when looking at spouse and/or child coverage, since individual rates can be lower for children and younger adults in the individual market.

Two Rules Collide
Under current FSA/POP contract language, an employee is only allowed to drop your group coverage if there is a change in family status, or when your group medical plan has its open enrollment.

The open enrollment period for individual plans only runs from November 15th through February 15th annually, with a start date for coverage beginning as early as January 1st .

The problem arises when your group plan’s open enrollment period does not coincide with the individual marketplace’s open enrollment period. Under this circumstance, employees won’t be allowed to drop your group coverage mid-way through your group plan’s contract year unless they have a qualifying change in family status.

Change Your FSA/POP
Contract Now you can remove this obstacle by adding an additional reason for an employee to terminate group coverage: the option of dropping coverage during the individual medical open enrollment period.

What to Do Now?
Follow these steps to determine if you need to make a contract change, and if so, the steps to follow.

  • Group Medical Renewal Date: Determine when your medical plan next renews. If it will renew on January 1st or February 1st, your open enrollment coincides with the individual market’s open enrollment, so you won’t need to update your FSA/POP contract. If it renews any other month, continue to the next item.
  • Contact GHB Insurance: We will help you decide if you should add this new provision. If you want to move forward, we will walk your FSA/POP vendor through the process of adding the required language to your FSA/POP contract and Summary Plan Description.
  • Notify Your Employees: Let your employees know that they have the option of canceling group coverage for themselves or for any of their dependents during the individual market’s open enrollment.
  • Allow Terminations for 1/1, 2/1, and 3/1: You won’t need to police your employees to ensure that they actually move dropped members to another individual plan. You just need them to attest that they have enrolled or will enroll on an individual plan through their state’s marketplace.

This article is provided for informational purposes only. Please contact your attorney and/or accountant to determine if this information may affect your business. © 2015 GHB Insurance

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