The IRS created two new cafeteria-plan opt-out options to resolve some healthcare reform issues. To be effective, however, the employer needs to amend its plan to include them. The two new opt-outs are the following:

  1. If an employee falls below 30 hours and the change does not affect the employee’s coverage under the employer’s plan, an employee may opt out to get coverage from a public marketplace. This will happen if an employee is a variable employee who was a full-time employee during a measurement period and changed to part-time status during the ensuing stability period. In that situation, the employee would still be included in the group plan, but may no longer be able to pay for participation in the plan. So this opt-out would enable them to switch to the marketplace.
  1. If an employer’s plan has a non-calendar, fiscal year. Without this opt-out, an employee who wants to move to the public marketplace would either have a coverage gap or double coverage as a result of the difference year ends of the employer’s plan and public marketplace.

The ability to revoke an employer plan election for these reasons does not extend to FSA elections.

If an employer intends to incorporate these new election revocation options, the group’s plan documents must be amended to incorporate the changes.

The revocations only work one way. An employee may revoke his or her employer-plan election to go with a marketplace; but an employee may not revoke marketplace coverage to elect an employer plan.

The notice took effect on September 18, 2014.


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