Amwins Connect - June 2025 Question of the Month

Amwins Connect – June 2025 Question of the Month

Question

Under a Cafeteria Plan, can we terminate an employee that would like to drop off our benefit plan so they can enroll in his new Domestic Partner employer’s benefit plan? Our benefit plan is a calendar year plan but his Domestic Partner’s employer benefit plan is July 1 – June 30.

Answer

When an employee enters into a new Domestic Partner Relationship, a cafeteria plan does not permit an election change under the ‘change in marital status’ event. The change in status rules allow an election change on account of a change in legal status, including marriage, death of a spouse, divorce, legal separation, and annulment.

However, a permitted election change event may allow the employee to change the cafeteria plan election to drop his major medical coverage if the plan allows election changes due to a ‘change in coverage under another employer plan’. If the employer’s plan allows election changes due to a ‘change in coverage under another employer plan’, the employee should be permitted to change his election but must show that he is covered under the plan of the partner’s employer.

From the IRS website:

Cafeteria plans can offer health insurance to employees, their spouses, and their dependents. The domestic partner and dependents in this case may not be participants in a cafeteria plan because they are not employees, but the plan may provide benefits to them. For example, a domestic partner may not be given the opportunity to select or purchase benefits offered by the plan, but the domestic partner may benefit from the employee’s selection of family medical insurance coverage or of coverage under a dependent care assistance program.

Resources

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