The Internal Revenue Service (IRS) recently published Notice 2022-41 in response to the fixes made to the “family glitch”. In summary, spouses and children of employees who are offered a group health plan will now (effective on January 1, 2023) determine if they have access to an affordable plan using the family premium rate rather than the employee-only premium rate.

The family premium rate is often more expensive than the employee-only premium rate which means offers of coverage to spouses and children of employees will have a higher probability of being considered unaffordable. This opens the door for more spouses and children of employees to qualify for Advanced Premium Tax Credits (APTCs) for plans that are sold on a Health Insurance Marketplace (Marketplace).

Notice 2022-41 expands the permitted change-in-status election rules available through a Cafeteria Plan (sometimes called a Premium-only-Plan, POP, or Section 125 Plan). Under the latest guidance, an employee may revoke coverage for their spouse and/or children so that they can enroll in a Marketplace plan during an
eligible open enrollment period or special enrollment period. The revocation may apply to any group health plan other than a Health Flexible Spending Account (Health FSA).

A somewhat similar election change was permitted in 2014 by virtue of Notice 2014-55; however, under this guidance it permitted the employee to revoke coverage for himself/herself and any related individuals in order to enroll in coverage through a Marketplace plan. The latest guidance allows the employee to retain group coverage for himself/herself while letting their spouse and/or children pursue coverage under a Marketplace plan.
 

This new guidance will apply to Cafeteria Plans that operate on a non-calendar plan year. It also is NOT a required election change. Employers may optionally allow this election change, and a plan amendment will be necessary to formally allow for this election change. To permit the election change, the Marketplace coverage
must also start no later than the day following the last day of coverage under the group health plan. Employers may rely on reasonable representation from the employee that their spouse and/or children have secured Marketplace coverage.