I'll see if I can keep this simple. Client employs about 15 people, using a PEO for processing payrolls and health insurance benefits. Through the PEO, the employer pays full health insurance premium for employees and allows them to pay via payroll deduction for spouse/dependent coverage. So no problems with ACA as far as I can tell.
Separately, about 6 employees are purchasing optional coverages from a list of accidental death, vision, dental and a few other coverages through another company. (I won't call the name of the company - I'll just duck that question.) The premium for this coverage is deducted on a pre-tax basis from the employees' paychecks. One employee decided to drop their elective coverage through this company. In a conversation today, the company rep implied that there could be negative tax consequences to the employer for allowing this employee to discontinue this coverage, because they are outside the open enrollment period and there hasn't been a major life event to justify it. The rep claims the tax problems could arise because this is a Section 125 plan.
I don't know if the company rep is blowing smoke or if there is a legitimate problem here. Can anyone enlighten me? Have I provided enough info? I've requested a copy of the plan document and maybe that will provide my answers, but thought I'd ask here while I'm waiting for that info.
Separately, about 6 employees are purchasing optional coverages from a list of accidental death, vision, dental and a few other coverages through another company. (I won't call the name of the company - I'll just duck that question.) The premium for this coverage is deducted on a pre-tax basis from the employees' paychecks. One employee decided to drop their elective coverage through this company. In a conversation today, the company rep implied that there could be negative tax consequences to the employer for allowing this employee to discontinue this coverage, because they are outside the open enrollment period and there hasn't been a major life event to justify it. The rep claims the tax problems could arise because this is a Section 125 plan.
I don't know if the company rep is blowing smoke or if there is a legitimate problem here. Can anyone enlighten me? Have I provided enough info? I've requested a copy of the plan document and maybe that will provide my answers, but thought I'd ask here while I'm waiting for that info.
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