What happens if an employee wants to drop out of the company plan and get into the exchange?  Seems like an option except the cafeteria plan rules prevent someone from making a mid-year change in their cafeteria plan election. Along comes the IRS with Notice 2014-55. This notice addresses situations in which individuals can change their health coverage elections under a Section 125 cafeteria plan and expands the options available. This is a step toward final rules that should be consistent with this notice, but this guidance provides for immediate remedies.

Generally, a cafeteria plan participant can’t change elections mid-year, with certain specific exceptions that the plan can permit. These exceptions did not include any reference to exchanges until now. Now a plan can provide for revocations in two situations directly related to participation in the exchanges.  Specifically, an employee may revoke a cafeteria plan election if:

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