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IRS Revises October 2022 Additional Election Change Guidance to Remove Non-Calendar-Year Plan Requirement



IRS Notice 2022-41 (Nov. 8, 2022)

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We recently reported on final IRS regulations that change the eligibility standards for an Affordable Care Act (ACA) premium tax credit (PTC) to fix the “family glitch” by providing that, for taxable years beginning after 2022, affordability of employer-sponsored coverage for an employee’s family members is based on the employee’s cost to cover the employee and those family members, rather than the cost of employee-only coverage (see our Checkpoint article). We also reported on related IRS guidance allowing participants in non-calendar-year cafeteria plans to revoke their elections for family health coverage midyear to allow one or more family members to enroll in a qualified health plan through an Exchange (QHP). The IRS has now posted a revised version of the guidance that does not include the non-calendar-year plan requirement. No other substantive changes have been made.

Under the revised guidance, cafeteria plans—regardless of plan year—can be amended to allow prospective midyear election changes from family coverage to employee-only coverage (or family coverage including one or more already-covered related individuals) under a group health plan that is not a health FSA and provides minimum essential coverage if the following conditions are satisfied: (1) one or more related individuals are eligible for a special enrollment period to enroll in a QHP, or one or more already-covered related individuals seek to enroll in a QHP during the Exchange’s annual open enrollment period; and (2) the election change corresponds to the intended QHP enrollment for new coverage effective beginning no later than the day immediately following the last day of the revoked coverage. Plans may rely on the employee’s reasonable representation regarding enrollment or intended enrollment in a QHP. The guidance is effective for elections that are effective on or after January 1, 2023. Amendments must be adopted on or before the last day of the plan year in which the changes are allowed and may be effective retroactively to the first day of that plan year if the plan operates in accordance with the guidance and participants are informed of the amendment. However, amendments for a plan year beginning in 2023 can be adopted on or before the last day of the plan year beginning in 2024.

EBIA Comment: The new family member Exchange enrollment event is optional, but employers that sponsor calendar-year cafeteria plans will appreciate having the flexibility to offer it under their plans. Although plan amendments may be adopted retroactively as provided in the guidance, election changes to revoke coverage on a retroactive basis are not permitted. For more information, see EBIA’s Cafeteria Plans manual at Section XIV (“When May Participant Elections Be Changed?”), which will be updated for the guidance. See also EBIA’s Health Care Reform manual at Section XXI.G (“Premium Tax Credits”).

Contributing Editors: EBIA Staff.

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