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In Notice 2022-41, the IRS expanded the cafeteria plan change in status rules to permit a cafeteria plan participant to change from an election of family coverage to an employee-only coverage plan. This will allow an employee to drop one or more family members so that such individuals could enroll in a public Exchange to take advantage of premium tax credits.  

The change is allowed if the following conditions are satisfied:

  • One or more family members are eligible for a special enrollment period to enroll in a qualified health plan (QHP) through the Exchange, or one or more family members, who are already covered, wish to enroll in a QHP during the Exchange’s open enrollment period.
  • The change in coverage under the group health plan corresponds to the intended enrollment of the family member(s) in a public Exchange for new coverage that is effective no later than the day immediately following the last day of the revoked coverage.

Important Considerations:

  • Employers do not have to provide this expanded ability to change salary reduction pursuant to the Notice.
  • Cafeteria plans must adopt plan amendments to provide for the new election changes described above on or before the last day of the plan year in which elections are allowed and the amendment may be retroactive to the first day of that plan year.
  • This new election change only applies to specified changes in coverage level under the employer’s group health plan. It does NOT apply to the health FSA.
  • This change applies to elections that are effective on or after 1/1/2023.
  • This change applies to both calendar year and non-calendar year plans.

Please email if you wish to amend your plan to allow for this change. DBS will waive standard amendment fees.