New Cafeteria Plan Rule

January 16th, 2009 Posted by Amelia

According to inside sources at the U.S. Department of Treasury, new federal regulations regarding cafeteria benefit plans are likely to be published within the next 30 to 60 days.

 

These regulations would be in addition to the regulations already published in the Federal Register. These regulations collect many of the principles and rules that the IRS or Internal Revenue Service has issued formally or informally over the past 20 years.

 

One aspect of the new regulations will not be finalized until President Barack Obama takes office. That is the controversial non-discrimination clause in the regulations. As soon as more information is available on that regulation, it will be published here.

 

One change in the new cafeteria benefits plan will allow employers to add COBRA benefits to the options available. This benefit is typically used by employees who become old enough for Medicare. The employee often uses cafeteria funds to pay for COBRA premiums, to continue insurance coverage for dependents. Under the new regulations, an employee could use funds from their healthcare saving account to fund COBRA premiums.

 

Adding COBRA or Consolidated Omnibus Budget Reconciliation Act insurance coverage to the benefits cafeteria plan may pose problems for some employers, because many of them outsource COBRA administration. However, as more employers offer this benefit, procedures should be streamlined. 

 

Under the new regulations, an employee who changes jobs can even be reimbursed by the new employer’s cafeteria plan for COBRA coverage under the old employer’s insurance policy. Since it is a valid healthcare expense, and the employee paid it during the appropriate year, the COBRA premium is covered.

 

The inclusion of COBRA benefits to cafeteria plans is especially beneficial to employees during tough economic times, such as those many industries are currently experiencing.  However, the latest regulations may not go into effect until January 1, 2010. As soon as the final date for the new regulations is available, we will publish it for our readers.

 

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  1. Posted by: jack

    question

    do folks who obtain or lose medicaid and or medicare have speciall enrollment rights up 60 days and if yes does that mean if i lose or or if i want to enroll i have 60 days from the trigger event date. If I lose my medicare that i can take pre tax elections under the caferteria plan as long as i do it by the 60 days deadline.

  2. Posted by: Amelia

    Hi jack! The answer is a qualified “yes” — although we can’t make a determination on your situation. Under some circumstances, an employee who loses other healthcare coverage must be added onto an employer’s group health insurance, even if the change does not occur during open enrollment. Suppose an employee has coverage under a spouse’s employee healthcare plan. The spouse loses his or her job. In many cases, the employee has 60 days to sign up for group health insurance with their own employer.
    We are not sure how this would play out with medicare. Usually people qualify for medicare because they are 62 or older, so there is not a point where they cease to qualify for medicare. (And frankly, few if any employer-sponsored healthcare plans can compete with the price of medicare — it’s free!) We are also not sure how this would apply with medicaid. Only those with the very lowest incomes qualify for medicaid. It is hard to invision a situation where a full-time employee would even qualify for medicaid, much less lose that coverage. HTH, and thanks for reading the blogs!~ Amelia

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