Question: Will employees who opt for coverage in the Individual Exchange be allowed to use their employer-sponsored cafeteria plan to pay their premium with pre-tax dollars.
Answer: No. HHS regulations prohibit employers from permitting employees to use pre-tax dollars in their cafeteria plan to pay for coverage through a QHP in the Individual Exchange. It does permit SHOP enrollment using a cafeteria plan if the employer is eligible for the SHOP (50 employees or less). This recent provision amends section 125 of the Internal Revenue Code relating to cafeteria plans. It states that a qualified benefit does not include a (QHP) offered through an Exchange unless the employer is Exchange-eligible and offers employees the opportunity to enroll in a QHP through the SHOP Exchange. Effective date is for taxable years ending on or after Jan. 1, 2014.