Mid-Year Election Changes Under §125 Rules

This guide details the rules governing mid-year election changes under §125 for cafeteria plans. It explains that pre-tax elections made by employees are generally irrevocable for the plan year unless a recognized change in status or life event occurs. The document outlines the implications of failing to adhere to these rules, which can jeopardize the tax-favored status of the cafeteria plan for all participants. It further distinguishes between the ability to drop or add coverage mid-year and the restrictions on changing pre-tax contributions. A table is provided that lists specific events that permit mid-year election changes, including changes in marital status, number of dependents, and employment status. The guide emphasizes the importance of confirming both the plan's allowance for coverage changes and the compliance with §125 rules. Additionally, it discusses the consistency rule, which mandates that election changes must correspond with the event affecting eligibility, and the timing of these changes, particularly in relation to births or adoptions.