Section 125 plans give employers and employees a powerful way to manage health and wellness benefits while maximizing tax savings. But what happens when life changes? Can employees adjust their elections mid-year?
The IRS has clear rules for this. Under a Section 125 cafeteria plan, changes to benefit elections are typically only allowed during open enrollment, unless a qualifying event occurs.
Here’s everything employers and HR teams need to know about IRS Section 125 qualifying events, how they work, and how Health Sphere’s Revive and Thrive plans help manage them seamlessly.
What Is a Qualifying Event Under IRS Section 125?
Understanding qualifying events is critical because mistakes in handling them can lead to IRS penalties, unhappy employees, or even lost coverage opportunities. Employers must balance compliance with compassion, ensuring that workers can adjust benefits when life changes unexpectedly. By staying proactive, companies not only avoid risk but also build trust with their teams. Section 125 plans, when managed correctly, turn complex regulatory requirements into an advantage, saving money while keeping employees protected during important life transitions.
A qualifying event is a major life change that allows an employee to make adjustments to their pre-tax benefit elections outside the normal open enrollment period.
The IRS defines a Section 125 cafeteria plan qualifying event as one of the following:
1. Change in Marital Status
- Marriage or divorce
- Legal separation
- Death of a spouse
- Annulment
2. Change in Number of Dependents
- Birth or adoption of a child
- Death of a dependent
- Gaining or losing custody of a child
3. Employment Status Changes
- Start or end of employment
- Change from full-time to part-time (or vice versa)
- Begin or return from unpaid leave
- Strike, lockout, or other employment disruption
4. Dependent Eligibility Status
If a dependent becomes ineligible due to age or other factors, the employee may update their elections accordingly.
5. Change in Residence
If the employee moves to a new ZIP code or area where different plan options or coverage levels apply.
6. Significant Changes in Spouse or Dependent Coverage
If a spouse gains or loses coverage through their own employer, or if their employer’s plan changes significantly.
7. Court Orders and Judgments
Court-ordered coverage changes for children or dependents are also considered qualifying events.
How Soon Must Changes Be Made?
To comply with IRS Section 125 cafeteria plan requirements, any change in benefits must be:
- Consistent with the life event
- Requested within 30 days of the event
If these steps are not followed, the employee typically has to wait until the next open enrollment period to make changes.
Why Health Sphere Makes This Process Easier
Managing irs section 125 cafeteria plan qualifying event can be complex, especially for growing teams. That’s where Health Sphere steps in.
Our Revive and Thrive plans are fully managed, which means:
- Automated tracking of qualifying events
- On-demand support for HR teams
- Clear documentation and IRS compliance
- Simple portals for employee updates
Whether you’re running payroll for 20 or 2,000 W2 employees, we streamline the administration of Section 125 benefits, while keeping your business protected from costly compliance missteps. This helps you focus on the importance aspects of your business, while we handle the paperwork.
The Revive and Thrive Advantage
Revive
Built for teams seeking comprehensive coverage and maximum savings, Revive includes:
- 24/7 Telehealth
- RX and Urgent Care at $0 copay
- Family coverage with 12 annual care visits
- Group Term Life Insurance
- Minimal Essential Coverage (MEC)
- Wellness and counseling tools
- No out-of-pocket cost for the employer
- $1,100 annual savings per W2 employee
Thrive
Perfect for teams looking to boost take-home pay and promote holistic wellness:
- $100/month net pay increase for employees
- Mental health, addiction, and couples counseling
- Diet, stress, and wellness programs
- Health vitals scan tools
- 24/7 virtual care with $0 copays
- Spouse and dependent coverage
- Employer savings of $600/year per W2 employee
Both plans leverage Section 125 and are structured for full compliance, especially when handling IRS Section 125 qualifying events.
Stay Compliant, Save More, Support Life’s Moments
Life happens. Employees get married, move across states, welcome new children, or change jobs. Employers who offer Section 125 benefits need a partner that keeps everything compliant, simple, and stress-free.
With Health Sphere’s Revive and Thrive programs, you’re not just offering tax-advantaged benefits. You’re giving your employees peace of mind during life’s biggest moments.
A Healthier Team Starts with Smarter Benefits
Talk to a Health Sphere advisor today to learn how Revive or Thrive can help your team navigate Section 125 qualifying events with confidence and ease.
