In our October Legal Update (available here), we described the publication of final IRS rules fixing the so-called "family glitch" in the availability of a premium tax credit for Health Insurance Exchange (Exchange) coverage. We also described the companion IRS Notice 2022-41, which allows cafeteria plans to permit participants to drop medical coverage for those covered family members who enrolled in a Qualified Health Plan (QHP) on the Exchange (either during an annual enrollment period or during a special enrollment period for Exchange coverage) on or after January 1, 2023.
At the time of publication of that Legal Update, the additional flexibility permitted by Notice 2022-41, by its plain terms, was available only to non-calendar year cafeteria plans. However, as we noted in the Update:
[In] multiple informal communications with the IRS, it appears that the IRS intended to extend the flexibility provided in Notice 2022-41 to calendar year plans. However, in light of the clear language in the "Guidance" section of the notice, we currently are unable to provide assurance that this election change opportunity may be adopted for a calendar year plan. Thus, published clarification from the IRS on this point would be welcomed.
In revisiting Notice 2022-41 (on November 9), it appears that the limitation on the applicability of this Guidance to only "non-calendar year" cafeteria plans has been removed, so that this additional permitted election change event may now be adopted for any cafeteria plan, even calendar year cafeteria plans. This is a welcome (albeit a quiet) expansion of the guidance!
If you would like to discuss adopting this new election change flexibility for your cafeteria plan, please contact one of our Employee Benefit attorneys directly. As noted in our Legal Update, there is additional time to formally amend your cafeteria plan, but if this optional new election change opportunity is adopted, participants should be informed of the change and the cafeteria plan should be in operational compliance as of the amendment's effective date.
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