Cafeteria Plan Elections

DB · November 2001

Last year I was told, and thought that I read, that employees must sign a salary redirection/election form EVERY year even if they don't want to participate in the Cafeteria/Section 125 Plan. I understand why dependent care and medical reimbursement must be done each year. However, if an employee doesn't want participate, do they have to complete a form which states they have been informed of the program and decline to participate each and every year?

Donna

Scott Ruth · November 2001

It depends on how your cafeteria plan is written. Some plans require that an employee make a written election each year before any salary reductions will be taken. Others state that a previous year's election will apply to the following year unless changed. Still others state that an employee is automatically enrolled unless they specifically elect out. It may also be that parts of your plan (such as the reimbursement accounts) are written differently than other parts (such as for health plan premiums).

All that being said, some employers decide it is safer to get elections from everyone each year in order to avoid these complicated rules. However, it will be the plan document that determines if this is actually required or not.

SandiF · April 2002

Our Cafeteria Plan sounds like yours and employees are required to sign new forms each year.

Lori B · April 2002

If someone is electing dep care or medical reimbursement amounts, they must make an affirmative election each year. It would be completely inappropriate to enable them to keep using a prior year's election. I would really question any provider that drafted a plan document to allow that! Contrast this to someone who is only in it for pretax premiums. They can elect once without the need to keep reelecting each year (assuming you plan doce allows that.)

If someone is declining to participate, I am unaware of any reg that requires a written decline each year. Seems like a lot of busy work to me to go collect those.

Rockie · April 2002

I agree with the comment about a lot of busy work. Our benefits person does this, but it is a nightmare trying to get employees to return things to the main office. Anything we can do to reduce this headache is worth it. I often wonder how companies with 5,000 employees deal with these types of issues and getting employee to return needed documents.

Any suggestions out there from the large companies?

Cafeteria Plan Elections

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