Bob recently had an interesting email "discussion" with a colleague, and since I was tangentially involved, he's asked me to tell our readers about it (Bob's "out of pocket" today).
The other day, I received this email from him:
"Having a disagreement with another agent over health insurance under a flex plan. Figured your buddy Pete would know. Can an employee who is covering dependents opt out of a plan off anniversary by claiming hardship? Premiums are too much, and wants to change to an individual plan. My understanding is they cannot. Even if they did, I am under the impression they cannot change their contribution (assuming they are pre-taxing premiums or benefits) until the anniversary. Do you know the answer?"
[ed: "Pete" is our colleague Pete Deist, about whom we've written before]
I replied that "on the one hand, it doesn't seem "right" to force someone to buy insurance (hello Massachusetts?!); OTOH, rules is rules, and I've never heard of "hardship" as a qualifying event (or would that be non-qualifying event?).
Probably some arcane Section 125 rule about this.
Really two questions though: plan rules and IRS rules.
I'm going to feel REALLY silly when Pete says "oh, that's an easy one, it's..."
In the event, I forwarded Bob's request on to Pete, and here's his reply:
"Your buddy [Bob] is correct.
The legal: Hardship is not a qualifying event permitting a change in a premium election mid-year. He can drop the insurance but cannot stop the withholding until the end of the year. The practical: I don't know of many groups that enforce this rule as it relates to premium"
One wonders, though, how often this comes up. Perhaps more often than we think.
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