Pre-Holiday Reminder: Take Care When Making Section 125 Open Enrollment Mistakes

Now that the busy holiday season is approaching, many clients may be making important decisions during the rush of the open enrollment season. It's important for employers to remember that individuals can't always change those choices if they end up regretting them. Mistakes that are caught prior to December 31 can be corrected, but once we reach January, only a change in status can give the employee the right to make changes (for example, getting married or having a child). Most agree that employers can correct mistakes that were made solely because of technical errors (for example, incorrectly checking the box for family coverage if the employee has no dependents). However, employers should tread carefully when it comes to granting changes that seem to be based on regretting the initial decision. Allowing these changes could mean violating IRC Section 125--and the employer could also be accused of fiduciary breach by the relevant health plan. For more information on the events that can give employees a valid right to change cafeteria plan elections under Section 125, visit Tax Facts Online. Read More: Link to Q3507.