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The new IRS Notice 1455 creates two new Section 125 mid-year qualifying events designed to help people who have been offered employer-sponsored coverage that might be too expensive for them. The first event is for employees who have had their hours reduced, so that they are now expected to average less than 30 hours of service per week, but they are still offered coverage under the employer’s group health plan.

These individuals will be able to change their employer coverage election and enroll in another plan that provides minimum essential coverage (MEC). For this event, employers may rely on a representation from the employee that they have enrolled or intend to enroll in new coverage (the employee does not actually have to provide proof of enrollment in order to drop coverage).

The second new event is known as the “Revocation Due to Enrollment in a Qualified Health Plan” and applies when an employee has experienced a mid-year special enrollment period qualifying event, which allows them to enroll in a qualified health plan (QHP) available in the exchange. It also applies during the exchange’s annual open enrollment period.

This means if an employee was offered coverage by an employer at a time other than during the exchange’s open enrollment period and that coverage was unaffordable and/or not minimum value coverage, the employee could then revoke their election and drop the employer coverage to instead obtain coverage through the exchange. Previously, there was no qualifying event allowing a Section 125 plan to recognize the special enrollment periods in a QHP offered through the exchange. Nor could an employee enroll in a QHP during the exchange open enrollment period and drop coverage through an employer-sponsored plan if that employer sponsored a non-calendar year plan.

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