Can a Spouse Leave the Plan at Anytime

[URDRWHO]

Talked more with the guy. The business isn't new but has reached a point that it can support / buy health insurance plus a richer plan. Yes, the FSA has to be paid for and on that I agree, it makes sense. But to be stuck in the health premium, it just doesn't seem right.

I don't think that's quite right, about the premium and 125's. Pretty sure there's an out.


skimming a section 125 booklet.. it looks like spouse starting a business is a change. One thing are we talking premium or healthcare/childcare expenses? two different animals under a plan. If it's reinbursement accounts, pretty much stuck. Insurance premiums, nope.

 

[leevena]

I believe they do have an FSA and that falls under Section 125. Premium payments may also be pre-tax basis, I'm not sure. So maybe the HR person is quoting Section125 rules and not insurance rules. What you are saying is; the spouse cancels coverage; the employer would continue deducting a spouse premium but the spouse could never file a claim on that policy? I can't think of what at the moment..... but that idea seems to disobey the idea of insurance. If the insurance company is still getting paid, they would need to pay all spousal claims. If not, there is no risk and therefore it isn't insurance.

So it appears that there is a 125 premium conversion plan in effect. So while the dependent can cancel the medical coverage, the employee will still have the dependent cost deducted for the remainder of the 125 plan year, at which time they can cancel the deductions.

The money deducted is not going to the carrier. The carrier should be notified of the dependent cancellation and they will cancel coverage. The deduction will continue and those monies will be deposited into the 125 account. Any excess monies in the account can be used by the employer for the 125 plan.
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You seem to be forgetting that tax law and the IRS got involved via the section 125. Logic is often counter productive when dealing with the IRS.

Also, don't forget this may just be laziness on the part of HR. If the spouse leaves the group, that creates paperwork. Guess who gets to handle it?

While it may seem "illogical" it is actually not. In exchange for the tax break, the employer and employee are presented with a risk...always a risk/reward scenario. In this situation the "risk" now takes over and the employee "loses" on the bet.

 

[URDRWHO]

Yes I believe we are talking two different animals. I guess the plan document would tell it all. It appears there is a 125 but can't be sure. I would probably be wasting my breath to ask what the arrangement is and is it a POP plan or what. So why in the world would the spouse leave a plan if they still need to pay into the 125? They would essentially be paying for two plans, the old one and the new one. So if the spouse's own company starts a health plan, it doesn't fall under qualifying event. Interesting thought.....what if the spouse were to loose his job and to save money they want to go bare (without insurance on the spouse). If they can't get out, such an arrangement could put them in a bankruptcy situation. An interesting set of handcuffs. Its like mak'in deals with the devil!

So it appears that there is a 125 premium conversion plan in effect. So while the dependent can cancel the medical coverage, the employee will still have the dependent cost deducted for the remainder of the 125 plan year, at which time they can cancel the deductions.

The money deducted is not going to the carrier. The carrier should be notified of the dependent cancellation and they will cancel coverage. The deduction will continue and those monies will be deposited into the 125 account. Any excess monies in the account can be used by the employer for the 125 plan.

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Missed this part. I've never thought about tax planning as a transfer of risk.
While it may seem "illogical" it is actually not. In exchange for the tax break, the employer and employee are presented with a risk...always a risk/reward scenario. In this situation the "risk" now takes over and the employee "loses" on the bet.[/quote]

 

[LGilmore]

i think there are two separate issues. The medical reinbursement side and the premium side. The premium side the employee is NOT stuck paying premiums.

the reinbursement side, the money committed is committed. However, that said, the spouse can still submit medical claims for reinbursement, even though they are not on the employer plan.

I think we're getting the blind men and the elephant here. Two different parts make up a section 125. One side for premium and the other for reinbursements.



from a little googling.

When Election Changes are Permitted for Employees and their Eligible Dependents​

Permissible election changes vary depending upon the type of benefit involved. Please consult your legal advisor to obtain
information as to how the Section 125 requirements apply to different types of benefits.
1.​

​

​

​

Special Enrollment Rights: An event described in the Special Enrollment provisions as shown in the group
policy/plan;
2. Entitlement to or loss of eligibility for Medicare or Medicaid: The employee or the employee's dependent
becomes entitled to or loses eligibility for Medicare (Part A or Part B) or Medicaid, other than coverage consisting
solely of benefits under the program for distribution of pediatric vaccines);
3. Special Requirements relating to the Family and Medical Leave Act (FMLA): An employee takes leave under
FMLA, in which case the employee may revoke an existing election of health plan coverage and make such other
election for the remaining portion of the period of coverage as may be provided for under FMLA;
4. Significant cost or coverage changes: Refer to Definitions section below;
5. A judgment, decree or order: Resulting from a divorce, legal separation, annulment, or change in legal custody
(including a qualified child support order) that requires health coverage for an employee's dependent child or for a
foster child who is a dependent of the employee. The judgment, decree, or order is satisfied if it changes the
employee's election to provide the required coverage under the employee's plan for the dependent child; or permits
the employee to make an election change to cancel coverage for the child if the order requires the spouse, former
spouse or other individual to provide coverage for the child; or
6. Changes in status events, which include the following:
a) Legal marital status: Change in the employee's legal marital status, including marriage, death of spouse,
divorce, legal separation and annulment;
b) Number of dependents: Change in the employee's number of dependents, including birth, death,
adoption and placement for adoption. If dependent coverage is available under the group policy/plan and
an eligible employee who has previously not elected coverage acquires a dependent, we require that the
employee must become insured when the eligible dependent becomes insured;
c) Employment status: Change in the employment status of the employee or the employee's dependent,
including termination or commencement of employment, a strike or lockout, a commencement of or
return from an unpaid leave of absence or a change in worksite. This also includes a change in the
employee's or the employee's dependent's employment status resulting in the individual becoming or
ceasing to be eligible under the group policy/plan;
d) Eligible dependent status: Change in the eligibility of a dependent due to reaching a limiting age, change
in student status or any similar circumstance; and
e) Residence: Change in the place of residence of the employee or the employee's dependent provided that
the change in place of residence affects the eligibility for the employee or the employee's dependent's​

coverage under the group policy/plan.


I have NEVER seen any document or IRS that requires insurance premium to be deducted after the insured leaves or requests a change. The reinbursement account? different story.

 

[URDRWHO]

I agree that once you commit to X amount in the flex spending account, you are committed. In fact it is a use it or loose it arrangement. That side has never been the question. The question has been the premium part. The HR is telling them that they are committed to continue paying premiums and the spouse can not leave the insurance side -- the premium side. Thanks for the goggling info. My position has been the spouse can leave the insurance side and the employee of the spouse does not need to keep paying insurance premiums. So I think we are in agreement. Correct?

i think there are two separate issues. The medical reinbursement side and the premium side. The premium side the employee is NOT stuck paying premiums.

the reinbursement side, the money committed is committed. However, that said, the spouse can still submit medical claims for reinbursement, even though they are not on the employer plan.

I think we're getting the blind men and the elephant here. Two different parts make up a section 125. One side for premium and the other for reinbursements.



from a little googling.

When Election Changes are Permitted for Employees and their Eligible Dependents​

Permissible election changes vary depending upon the type of benefit involved. Please consult your legal advisor to obtain
information as to how the Section 125 requirements apply to different types of benefits.
1.​

Special Enrollment Rights: An event described in the Special Enrollment provisions as shown in the group
policy/plan;
2. Entitlement to or loss of eligibility for Medicare or Medicaid: The employee or the employee's dependent
becomes entitled to or loses eligibility for Medicare (Part A or Part B) or Medicaid, other than coverage consisting
solely of benefits under the program for distribution of pediatric vaccines);
3. Special Requirements relating to the Family and Medical Leave Act (FMLA): An employee takes leave under
FMLA, in which case the employee may revoke an existing election of health plan coverage and make such other
election for the remaining portion of the period of coverage as may be provided for under FMLA;
4. Significant cost or coverage changes: Refer to Definitions section below;
5. A judgment, decree or order: Resulting from a divorce, legal separation, annulment, or change in legal custody
(including a qualified child support order) that requires health coverage for an employee's dependent child or for a
foster child who is a dependent of the employee. The judgment, decree, or order is satisfied if it changes the
employee's election to provide the required coverage under the employee's plan for the dependent child; or permits
the employee to make an election change to cancel coverage for the child if the order requires the spouse, former
spouse or other individual to provide coverage for the child; or
6. Changes in status events, which include the following:
a) Legal marital status: Change in the employee's legal marital status, including marriage, death of spouse,
divorce, legal separation and annulment;
b) Number of dependents: Change in the employee's number of dependents, including birth, death,
adoption and placement for adoption. If dependent coverage is available under the group policy/plan and
an eligible employee who has previously not elected coverage acquires a dependent, we require that the
employee must become insured when the eligible dependent becomes insured;
c) Employment status: Change in the employment status of the employee or the employee's dependent,
including termination or commencement of employment, a strike or lockout, a commencement of or
return from an unpaid leave of absence or a change in worksite. This also includes a change in the
employee's or the employee's dependent's employment status resulting in the individual becoming or
ceasing to be eligible under the group policy/plan;
d) Eligible dependent status: Change in the eligibility of a dependent due to reaching a limiting age, change
in student status or any similar circumstance; and
e) Residence: Change in the place of residence of the employee or the employee's dependent provided that
the change in place of residence affects the eligibility for the employee or the employee's dependent's​

coverage under the group policy/plan.


I have NEVER seen any document or IRS that requires insurance premium to be deducted after the insured leaves or requests a change. The reinbursement account? different story.

 

[LGilmore]

"My position has been the spouse can leave the insurance side and the employee of the spouse does not need to keep paying insurance premiums. So I think we are in agreement. Correct? "

Never seen it, never read it on the premium side of the coin.

On the reimbursement side, you don't even have to be on the plan to submit medical expenses for reinbursement. So spouse could drop off plan and still submit medical claims for reinbursement. Been doing that for around 20 years myself.

 

[URDRWHO]

Leaving out the reimbursement of the 125 plan and only discussing the health premium side. So after reading the IRS publication I think the fellow may be stuck. He is in a gray area and someone would need to clarify if his business and self employed individual health insurance, would be a qualifying event. Only the government could make such rules.

"My position has been the spouse can leave the insurance side and the employee of the spouse does not need to keep paying insurance premiums. So I think we are in agreement. Correct? "

Never seen it, never read it on the premium side of the coin.

On the reimbursement side, you don't even have to be on the plan to submit medical expenses for reinbursement. So spouse could drop off plan and still submit medical claims for reinbursement. Been doing that for around 20 years myself.

 

[STIBROKER]

Leaving out the reimbursement of the 125 plan and only discussing the health premium side. So after reading the IRS publication I think the fellow may be stuck. He is in a gray area and someone would need to clarify if his business and self employed individual health insurance, would be a qualifying event. Only the government could make such rules.

what if he got divorced..... no way you could be made to stay on a spouse's group plan.....its all silly talk.....I use to pull children and spouse's off group plans all the time and put them on indy plans...it's not like we live in a communist country......

 

[LGilmore]

Change in the employment status of the employee or the employee's dependent,
including termination or commencement of employment, a strike or lockout, a commencement of or
return from an unpaid leave of absence or a change in worksite. This also includes a change in the
employee's or the employee's dependent's employment status resulting in the individual becoming or
ceasing to be eligible under the group policy/plan;


I've never seen a situation where speaking about the premium side of things any employee was stuck. Never ever. Been doing these a long time. That is why the carrier said no problem, as do you think they've looked into it too?

HR people aren't always the sharpest tac in the box. Ask to go through the plan outline with her as you can state you haven't seen it that way before.... It's pretty simple to miss as others here commented on another aspect of the 125 plans. They were correct in their comment if the question was asked differently about another aspect of these situations.

 

[URDRWHO]

When you read this, I'm not so sure about the "not communist" part. http://www.irs.gov/pub/irs-irbs/irb00-15.pdf To these HR people divorce is a qualify event and no problem.

what if he got divorced..... no way you could be made to stay on a spouse's group plan.....its all silly talk.....I use to pull children and spouse's off group plans all the time and put them on indy plans...it's not like we live in a communist country......

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Neither have I ever seen a situation on the premium side where an employee is stuck. What if the plan stinks and you decide to get something on your own that is better. Are we to conclude it doesn't matter, ya gotta keep paying. What the heck???? The Feds get involved and the waters get muddy and deep. What was wrong with, ya get off the plan during the year and you must wait until open enrollment to get back on. Ah but these are the same idiots that made up the rules for Medicare Advantage enrollment and all those arcane rules. The longer I am on this earth the more I consider that the people governing us stupid as naked mole rats. I'm also growing more and more found of V for Vendetta.http://www.insurance-forums.net/forum/images/smilies/1arghh.gif http://www.irs.gov/pub/irs-irbs/irb00-15.pdf

Change in the employment status of the employee or the employee's dependent,
including termination or commencement of employment, a strike or lockout, a commencement of or
return from an unpaid leave of absence or a change in worksite. This also includes a change in the
employee's or the employee's dependent's employment status resulting in the individual becoming or
ceasing to be eligible under the group policy/plan;


I've never seen a situation where speaking about the premium side of things any employee was stuck. Never ever. Been doing these a long time. That is why the carrier said no problem, as do you think they've looked into it too?

HR people aren't always the sharpest tac in the box. Ask to go through the plan outline with her as you can state you haven't seen it that way before.... It's pretty simple to miss as others here commented on another aspect of the 125 plans. They were correct in their comment if the question was asked differently about another aspect of these situations.