Can an employee change his or her elections under a cafeteria plan?

To make sure than cafeteria plan election amounts qualify for tax breaks, participants must make their benefit elections before any taxable benefits under the plan become available to them. This means that employees must make an annual election among all the benefit offering available to him or her.

In general, once an election is made, the election cannot be revoked for the plan year in question. However, there are exceptions to this rule. If permitted to do so by the terms of a cafeteria plan, an employee may revoke an election under a cafeteria plan or make a new election in the following situations:

• The employee is making a new election that corresponds with the special enrollment rights provided under HIPAA;

• There is a change in the employee’s status;

• There is a judgment, decree, or order requiring coverage for a dependent;

• The employee, the employee’s spouse, or the employee’s dependent becomes entitled or ceases to be entitled to Medicare or Medicaid;

• There is a significant change in the cost or coverage of health benefits; or

• The employee is on leave pursuant to the Family and Medical Leave Act.

Change in status. Throughout the course of the year, employees will marry, divorce, have a child or adopt one, or become disabled. All of these events are changes in status that can impact benefits. Events constituting a change in status include:

• Legal marital status-marriage, death of spouse, divorce, separation, or annulment;

• Number of dependents-birth, adoption, placement for adoption, or death of a dependent;

• Employment status-start or termination of employment by the employee, spouse or dependent;

• Work schedule-reduction or increase in the number of hours worked by the employee, spouse or dependent, a switch between part-time and full-time status, a strike or lockout, or the start of or return from an unpaid leave of absence;

• Residence-a change in place of residence or work of the employee, spouse, or dependent.

• Situations where a dependent satisfies or ceases to satisfy the rules for unmarried dependents-due to attainment of age, student status or similar circumstances as provided in the plan; and

• For adoption assistance offered through a cafeteria plan, the start or termination of an adoption proceeding.

When there is a status change, a plan may permit the employee to revoke or modify his or her election only if a change of status occurs that affects eligibility for coverage and the election change corresponds with the effect on eligibility.