Can a Cafeteria Plan adjust the participants elective contributions for health insurance premiums if the premium amount changes?
A. If the cost of a health plan provided by an independent, third-party provider under a Cafeteria Plan increases or decreases during a plan year, the Cafeteria Plan may automatically increase or decrease all affected participants’ elective contributions for such health plan. If the premium amount significantly increases, a Cafeteria Plan may also permit participants to either make corresponding changes to their premium payments or to revoke their elections and, in lieu thereof, to receive on a prospective basis similar coverage under another health plan. If the coverage under a health plan is significantly curtailed or ceases during a period of coverage, a Cafeteria Plan may permit all affected participants to revoke their elections of the health plan, and to receive on a prospective basis similar coverage under another health plan. (Reg. Sec. 1.125-2 Q&A-6) Q.
Related Questions
- Can a Cafeteria Plan be used to pay the premiums for a group of individual health insurance policies, or must that benefit be a group health insurance policy sponsored by the employer?
- What happens to any unused contribution? Why can the participants get a refund of their unused contributions at the end of the Plan Year?
- Can a Cafeteria Plan adjust the participants elective contributions for health insurance premiums if the premium amount changes?
