If an employee's spouse is going through her open enrollment and the employee now wants to drop our coverage and go on the spouse's health plan, is this allowable? Essentially, is Open Enrollment considered a life event? I wouldn't think so but I wanted to double check.

An "Open Enrollment" is not a life event. Is there anyting else going on that may make this different or is it just a situation where it's OE time again?

Actually, if the spouse's plan has a different open enrollment period than the employee's plan, Section 125 does allow the mid-year election change to add or drop coverage. 26 CFR 1.125-4(f)(4) states that an employer may permit a mid-year election change due to a change in coverage under another employer's plan if the plan "permits participants to make an election for a period of coverage that is different from the period of coverage under the other cafeteria plan or qualified benefits plan." Therefore, if the two plans have different open enrollment periods, the employers can permit the change to either enroll or disenroll mid-year due to an election change during the other employer's open enrollment period. This is very common for employers to permit. I've never seen one deny the change.

Chloe...the way I understand this situation is that there needs to be a significant change in benefits to make this an ok event. Am I wrong?

I'd actually read this to mean the coverage itself must be for different periods (plan years) and not just the election period. But it's a good suggestion by chloe for a possible solution to this.

Would you allow the employee to drop their healthcare FSA then? The employee elected $2,000 and has not been reimbursed anything.

In my experience, this has always applied when there were different open enrollment periods. If the open enrollment were different but for the same plan years, there wouldn't be a problem at all. For example, my husband's open enrollment is this week. Mine isn't until next month. But both elections are for a plan year 1/1 - 12/31. So, we wouldn't need a life status event to change our elections at open enrollment. But if one plan year is 7/1 and the other is 1/1, that's where you need a life status event and this rule comes into play. Its very common for employers to allow this as a life status event.

Chloe...I always thought that there needed to be some type of benefit change or cost change to allow this. Are you saying that if there were no changes to either plan, they could classify this as a life event?

Yes, this provision is outside the cost/change provision.