The IRS provided confirmation of a new qualifying event in which a participant may revoke his or her health plan election without violating the Section 125 cafeteria plan election in order to purchase coverage through a competitive marketplace (Exchange) established under the ACA. These provisions do not apply to FSAs.  

This IRS notice expands the application of the permitted change rules for health coverage under a � 125 cafeteria plan. In particular, this notice addresses the situation in which a cafeteria plan participant may wish to revoke, during a period of coverage (commonly a plan year), the employee's election for employer-sponsored health coverage under the cafeteria plan in order to purchase a Qualified Health Plan through a competitive marketplace established under � 1311 of the Patient Protection and Affordable Care Act, commonly referred to as an Exchange or a Health Insurance Marketplace. This situation involves an employee participating in an employer's group health plan, who would like to cease coverage under the group health plan and purchase coverage through a Marketplace without that resulting either in a period of duplicate coverage under the employer's group health plan and the coverage purchased through a Marketplace or in a period of no coverage.

This notice permits a cafeteria plan to allow an employee to revoke his or her election under the cafeteria plan for coverage under the employer's group health plan (other than a flexible spending arrangement (FSA)) during a period of coverage. 

The Treasury Department and the IRS intend to modify the regulations under � 125 consistent with the provisions of this notice, but taxpayers may rely on this notice immediately.