Does your cafeteria plan need to be amended soon in connection
with the new Health Care Laws?
As an example where an amendment might be necessary, group health
plans that offer coverage covering dependent children must make
that coverage available to adult children until they reach age 26
under the new Health Care Laws, and this requirement applies for
plan years beginning on or after September 23, 2010. Cafeteria
plans (those plans which allow employees to pay premiums for health
care on a tax-free basis) may need to be amended to include
employees' children who have not attained age 27 as of the end
of the taxable year as covered individuals. If such an amendment is
needed, you may need to act quickly, and maybe by the end of this
year.
Under current proposed cafeteria plan regulations, a cafeteria plan
may not be retroactively retroactive amended, and amendments are
allowed to be applied prospectively only. However, in Notice
2010-38, the IRS has provided that an amendment to a cafeteria plan
to allow coverage of children under age 27 retroactively back to
March 30, 2010 or later may be made if it is made by December 31,
2010 and it is retroactively effective to the first date in 2010
when employees are permitted to make pre-tax contributions to cover
children under age 27. Thus, if your plan will be allowing coverage
of children under age 27 at some point in 2010, the IRS Notice
will, contrary to current proposed cafeteria plan regulations,
allow a retroactive amendment to your cafeteria plan to be made if
it is made by December 31, 2010, and it is effective as of the
first day on which pre-tax contributions for such coverage could be
made. Or, if your plan will be allowing coverage of children under
age 27 as of January 1, 2011, then if your cafeteria plan needs a
corresponding amendment, it will need to be adopted and in place by
January 1, 2011.
You may wish to discuss this with whoever provides your cafeteria
plan documents to see if action this year is necessary.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.