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February 2009 Question of the Quarter

I have an employee who missed our open enrollment period because he was on vacation, can I allow him to come onto the plan now?

The answer to the question will depend on many factors. First, employers must look at the specific terms of their plan document to see what the eligibility rules state with regards to late enrollees. Most plan documents do not allow plan participants, who miss their open enrollment, to come onto the plan late, unless the plan participant has experienced a HIPAA special enrollment right or status change (as allowed under the cafeteria regulations for those employers who take contribution on a pre-tax basis).

Assuming your plan document does not allow late enrollees to come onto the plan late, as a self-funded health plan, you do have the right to make exceptions as to how your plan is administered, but you should not do this lightly. You should ask yourself the following questions when making your determination:

• Will my stop loss carrier be okay with this exception? Most stop loss carriers state they follow the terms of the approved written plan document. If your plan document does not support adding this person late, you should seek approval from your stop loss carrier before adding them to your plan. You do not want to find out down the road that there is no stop loss coverage for this individual because you did not adhere to the terms of your written plan document.
• Is the employee a highly-compensated employee? If you determine that the individual is a highly compensated individual, you will need to consider whether or not allowing this individual to come onto the plan late could result in taxation (under Internal Revenue Code Section 105) to both the employee and you at the end of the year. 
• Are contributions taken on a pre-tax basis? If you take employee contributions on a pre-tax basis as many employers do, you are aware, that under the cafeteria regulations, elections must be made prior to the start of coverage. For this reason, if you do allow the employee to come onto your health plan late, you should make sure that you take contribution on an after-tax basis for the individual that you are making the exception for, until the start of your next plan year.

After you have carefully considered the above, the ultimate decision will be left up to you as the Plan Sponsor.

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