When is Relocation a Qualifying Event for Cafeteria Plan Purposes?

Employees typically make annual cafeteria plans that cannot be modified throughout the year without risking the plan's qualified status. However, under IRC Section 125, elections may be modified if the employee, a spouse or a dependent experiences a "qualifying event", also known as a change in status. Relocation can, in some cases, count as a qualifying event. However, relocation is only a qualifying event when it renders the employee, a spouse or dependent newly eligible or ineligible for coverage. For example, if an employee moves, but remains eligible for the same health coverage after the move, the relocation event would not constitute a qualifying event. If a dependent moved outside of a network coverage area and lost coverage, that move could constitute a qualifying event. Additionally, changes in residence are permissible events--meaning that the employer can choose whether or not to include them without risking disqualification. For more information on the rules governing cafeteria plans, visit Tax Facts Online. : Q 3506.