Benefits are a critical part of an employee's compensation package. But there are a number of misconceptions about the benefits elections process and what businesses need to know. While most elections take place during open enrollment periods, the Internal Revenue Service (IRS) has provided businesses and employees guidance on circumstances where elections can take place out of cycle. Let's take a closer look at the essentials for managing your benefits elections process and five common misconceptions of which your employees and HR staff should be aware.
Adding or Eliminating a Dependent
Employees may potentially add or eliminate dependents from benefits coverage due to many life events. For example, a change in marital status would allow an employee to adjust their coverage. A marriage during the coverage year might lead to adding a spouse to specific plans, while a divorce might involve transitioning an ex-spouse off of their current coverage. The birth or adoption of children during the benefits year is also typically an event that allows employees to add new dependents to their plans.
Change in Geographic Location
A change in residence can also trigger a change in benefits status. For example, if an employee has a change of residence that takes them outside the coverage area for a specific benefits plan, it may be necessary to revisit the elections. An example of this would be if your company's healthcare plan coverage options varied by geographic region and an employee transferred between offices. A dependent moving out of the coverage area might also require coverage guidelines and eligibility to be revisited.
A Change in Dependent Eligibility
Many plans have certain eligibility requirements for dependents. Changes in a dependent's status during the regular year might affect their eligibility for ongoing coverage. For example, many healthcare plans require that older children become full-time students in order to be eligible for health insurance. If a dependent's enrollment dropped below a certain level or they left college, this event might trigger the need to reevaluate coverage eligibility and options.
A Change in Spouse or Dependent's Coverage Options
Life events in the family of an employee can also impact benefits elections outside of open enrollment. For example, if a spouse is employed during open enrollment and covered under another employer plan but later loses his or her job, they may have the eligibility to enroll in their spouse's benefits plan. Similarly, if a covered spouse takes a job that offers new benefits, they may have the option to update their coverage to the new plan.
Changes in Work Status
If a full-time employee reduces his or her work schedule below 30 hours a week, this change in work status may affect benefits eligibility. The employee may be permitted to change his or her elections, provided that the employee and dependents enroll in a healthcare insurance plan that meets minimum requirements.
The Society for Human Resource Management (SHRM) offers a helpful reference guide for benefits elections. Employers should ensure that they understand all plan and governmental guidelines determining benefits elections for their businesses. In cases where elections may be allowed outside of standard open enrollment periods, communicate all aspects clearly with employees and HR staff. When in doubt, consult a benefits expert or an employment attorney to ensure that you stay in compliance.