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Election Periods & The 30-Day Myth

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by Jason Cogdill on 08 September, 2017 with Add new comment

Frequently Asked Question: Is it correct that an employee has 30 days after making an election as a new hire, or 30 days after open enrollment ends, in which to make a change to his or her election?

A. No. This is a common misconception among employers and some employees. The misconception arises from the fact that most Section 125 plans sponsored by employers include a 30-day window to make a mid-year election change upon a status change or qualifying event (including HIPAA special enrollment events). The 30-day period is a feature of plan design and applies only to mid-year changes. It does not apply to elections made by new hires or elections made at open enrollment. Once the plan year begins or coverage is effective for a new hire, a pre-tax election cannot be changed without an IRS-recognized qualifying event. Three quick examples to illustrate:

  • Employee is hired with an immediate entry date for health insurance or other eligible pre-tax benefit options. Technically, the employer should receive the election on the first day of employment. If and when employee makes the election, he is locked into the pre-tax elections. There is no 30-day change period.
  • Employer holds its open enrollment in advance of a new benefits plan year for January 1. Employee elects health insurance or other eligible pre-tax benefit options. After the plan year starts, employee notifies employer on January 20 that he wishes to change one of the pre-tax elections. Should employer allow it? No, unless there is a recognized mid-year qualifying event under IRS and plan rules.
  • During the benefits plan year, employee experiences a recognized mid-year qualifying event. Per plan terms, employee has 30 days to notify the employer of the change. This is the only correct application of the 30-day rule.
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Jason Cogdill

Jason Cogdill

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