Benefits Buzz

Best Practices for Cafeteria Plan Elections

Posted on May 31st, 2018

This month’s Ask the Expert question comes from Jan in Alabama. Jan asks:
Is it mandatory that each employee meet with the insurance agent to elect or waive benefits offered through a Cafeteria Plan?
It is definitely not mandatory that each employee meet with the insurance agent in order to elect or waive coverage in the plan. There are, however, some best practices that employers can put in place when it comes to enrollment in the plan.
Affirmative Election Approach
Most employers use an affirmative election approach, in which employees actively select the benefits they want to enroll in each year. By default, employees are not enrolled in any benefits that they don’t select. As a best practice, we would still recommend maintaining some form of documentation (such as a waiver of coverage form) which shows that an employee declined coverage. This will help protect the employer if an employee later contests that they were not given an opportunity to enroll in a benefit or they thought they had enrolled in a benefit.
Negative Election Approach
Another option would be to use a negative election approach, where an employee is automatically enrolled in certain benefits unless they decline the coverage. We see this approach used often for the Premium portion of the Cafeteria Plan, but usually not for the Flexible Spending Account or the Dependent Care Assistance Plan. With this approach, employees would be required to complete a waiver of coverage if they do not wish to enroll in the benefits being offered.
Evergreen Approach
Some employers also use an evergreen approach, where employees are automatically re-enrolled in the same benefits each plan year unless they want to change or waive coverage during open enrollment.
Any of these options would be appropriate to use for the Cafeteria Plan, as long as employees are clearly informed what will be expected of them. We do not see any reason why an employer would need to require that each employee meet with an insurance agent personally to make their elections or waive coverage on the plan.
Thanks to Jan for the question, and keep an eye out for a new featured question next month.
Do you have questions about Cafeteria Plan elections? Ask the Expert!
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