We have an employee whose wife quit work over a year ago. He elects the "non-payroll" preium option and includes the payment of her COBRA insurance premiums on his cafeteria plan. She will no longer be qualified for COBRA some time during 2003, and he wants to add spouse coverage to our company's insurance plan. Can he make that mid-year change in his cafeteria plan due to his spouse becoming ineligible for COBRA?

Exhaustion of COBRA is a HIPAA event which will allow the employee to add the spouse to the underlying health plan. Depending on the wording in the 125 plan, any increased payroll deductions for the spouse’s coverage should be taken pre-tax (most 125 plans would see this as a status change and allow an election change, but this cannot be assumed).