Permissible Status Changes In A Cafeteria Plan

Elections under a Cafeteria Plan are considered irrevocable unless the individual separates from service with the sponsoring employer or experiences an event known as a status change.

Individuals experiencing a qualified status change may make a corresponding change to their original elections according to the following general guidelines:

• Status changes must be prospective (forward-looking) with the exception of HIPAA Special Enrollments for birth or adoption of a child (which generally must be reported within 30 days of the birth or adoption).
• Participants may be allowed to increase or decrease group-term life insurance and disability coverage due to any status change. For an HR Generalist, managing these adjustments is a key part of human resources compliance.
• There is no IRS rule prescribing a period of time by which election changes, as a result of a change in status, should be made. Plan terms can require election changes be made within a specified period (other than HIPAA and COBRA-prescribed election periods).
• A plan is not required to allow any election changes, or a plan may be selective in which changes are allowed. For example, a plan may not recognize a loss of a dependent as a status change. Conversely, the plan may recognize all the status changes as allowed by the IRS.

Qualified status changes include:

• Change in employment
• Change in residence
• Change in marital status
• Change in number of dependents
• Change of dependent status
• Adoption assistance
• Loss of other coverage
• Employer-created coverage or cost changes
• Judgment/Decree/Order
• Medicare/Medicaid
• FMLA Leave
• HIPAA Special Enrollment

Administrative Tip: To provide for uniform plan administration and protect a plan-qualified status, employers should list the status changes allowed in their plans in their written Cafeteria Plan documents and in their Summary Plan Descriptions, ensuring alignment with labor law and FLSA reporting standards.