New ACA Rules Allow Employees A Second Trip Through The Cafeteria Plan Election Line

Under Notice 2014-55, the Internal Revenue Service (IRS) will now permit a cafeteria plan to allow an employee to revoke his election for coverage under the employer's group health plan in order to purchase a qualified health plan offered through the Marketplace (formerly referred to as the Exchange) under the Affordable Care Act (ACA). The guidance applies to pre-tax elections other than for a health care flexible spending account (Health FSA). The IRS will be modifying its regulations, but taxpayers may rely on the notice.

Background

Generally, elections under a cafeteria plan must be irrevocable for the plan year to which they relate except to the extent that optional changes are permitted as a result of a change in status. Although certain changes are permitted under the current change-in-status rules, a cafeteria plan may not allow an employee to revoke an election under the group health plan during a period of coverage solely to enroll in a qualified health