I have a client with a fully self-funded medical and dental plan and whose health premiums are deducted on a pre-tax basis that presently the following scenario.

They have an employee who currently has employee only coverage and has just presented a QMSCO on two dependent children. The children are currently covered under individual medical policies. The employee wants to drop the individual policies and add the dependents to the group plan. (fyi, there are no significant cost difference or benefit difference between both plans).

Am I correct in stating that this employer does not have to accept the QMCSO because the children already have coverage (that they are not losing) and therefore there is not qualifying event to make the change eligible under Section 125 rules?

If the order is on the Plan and received directly by the Plan, the Plan should comply. If it is a brand new order on the employee and specifies group coverage, the Plan may want, and be able, to comply. If it is an old order on the employee, Annual Enrollment would be the time for this change.

If the employee really wants to do this and you can't construct a valid qualifying event, have the employee work with the ex to go back to court for an order that would make the Plan provide the coverage. As an alternative (albeit a VERY BAD alternative) the employee could simply drop the kids from the private plan and wait for the ex to go to court to get the order.

Eventually, the kids will be on the Plan. I would work with the employee to figure out how to best make it happen.