IRS Qualified Change in Status Events
In most circumstances, an employee’s annual election amounts or any insurance premiums they are having payroll deducted cannot be changed. An employee may change their election if they have a qualifying life event and the election change is consistent with the event prompting the change.
An employee may be able to change an election if:
- The employee’s legal marital status changes through marriage, divorce, death, legal separation or annulment.
- The employee’s number of dependents changes because of birth, adoption (or placement for adoption), or death.
- There is a change in the employee’s employment status or the employment status of their spouse or any dependents. The employment status change must affect eligibility under this plan or a plan maintained by the employer of their spouse or dependent due to commencement or termination of employment or a change from full-time to part-time or part-time to full-time employment. The election change must correspond with the gain or loss of coverage.
- An employee’s dependent satisfies or ceases to satisfy the requirements of the Flexcomp Plan. This may allow the employee to make a corresponding change to increase or where appropriate, decrease coverage under this plan for the dependent.
- If an employee is served with a judgment, decree or court order. This includes divorce, legal separation, annulment, or change in legal custody. The election change must be consistent and correspond to the court order.
- The employee’s spouse, or any of their dependents, become eligible or lose eligibility for coverage under Medicare or Medicaid. The election change must correspond with the gain or loss of coverage.
- The employee’s dependent care expenses change due to a provider rate change. This includes both increases and decreases in expenditures. However, the provider must not be the employee’s relative.
- Change in dependent care provider. The employee may make an election change to reflect the cost of the new provider.
If an employee goes on leave of absence, military leave, or a leave covered by the Family and Medical Leave Act (FMLA), their medical spending and dependent care contributions or pre-tax insurance premiums may be made as follows:
- Under the pre-pay option, the employee may pay the amounts due while on leave on a pre-tax basis by having the total amount due payroll deducted prior to the leave.
- Under the pay-as-you-go option, the contribution may also be made pre-tax from any taxable compensation, such as annual leave or sick leave during the leave period.
- Under the “catch-up option”, NDPERS will continue coverage during an unpaid leave. Upon return from leave, a participant will catch up with pre-tax payroll deductions.
- The employee may elect not to participate while on leave. If they elect not to participate while on a leave of absence, they will not be entitled to receive reimbursements for claims incurred beyond the last day of the month a contribution is received. Upon returning from leave, the employee may reinstate the coverage that was in effect prior to their leave or reinstate the coverage less the contributions that were missed during the leave.
A change in election is allowable and consistent with IRS regulations only if the change in status results in the employee, or their spouse or dependent, gaining or losing eligibility for coverage under the employer’s plan. The election change must correspond with the gain or loss of coverage.
If the change in status event is the birth of a child, and the employee is a participant in the plan at the time of birth, the effective date of coverage is the date of birth. If the change in status event is for reasons other than the birth of a child and the employee is a participant in the plan, the effective date of coverage is the first appropriate pay period after the election is received.
If an employee is not enrolled in the Plan prior to the change in status event, the effective date of coverage is the date the first payroll contribution is received.
Upon receipt of the form, NDPERS will review the change in status request and send the agency payroll/human resource contact and employee notification indicating request is either approved or denied.