Changing Elections Upon a Change in Residence
By Brian Gilmore | Published February 26, 2026
Question: When can employees change their health plan election based on a change in residence?
Short Answer: The Section 125 cafeteria plan rules provide that employees can make a mid-year health plan election change upon the change in residence of the employee, spouse, or dependent where a) the move affects the individual’s eligibility for coverage under the plan, and b) the health plan election change is consistent with the individual’s change in residence.
General Rule: Section 125 Cafeteria Plan Irrevocable Election
Employees’ elections to pay the employee-share of the premium for health and welfare plan coverage on a pre-tax basis or make pre-tax FSA contributions are governed by Section 125 of the Internal Revenue Code. The Section 125 cafeteria plan rules are very strict when it comes to the irrevocability of employees’ elections.
The general rule under Section 125 is that all elections (including an affirmative or default election not to participate) must be:
made prior to the start of the plan year, and
irrevocable for the plan year unless the employee experiences a Section 125 permitted election change event.
The permitted election change events are set forth in Treas. Reg. §1.125-4 (e.g., marriage, divorce, birth, adoption, change in employment status affecting eligibility, change in residence affecting eligibility). Most cafeteria plans provide a window of 30 days for an employee to make a mid-year election change upon experiencing a permitted election change event.
For more details:
The Change in Status Consistency Rule
The Section 125 rules enumerate several events employees may experience that permit a mid-year election change. These are sometimes referred to as “permitted election change events” or “qualifying life events.” Among these events that permit election changes are a category referred to as “change in status” events.
The “change in status” events include a mid-year change in:
Legal marital status (e.g., marriage, death of spouse, divorce, legal separation, annulment);
Number of dependents (e.g., birth, death, adoption, placement for adoption);
Employment status (e.g., termination or commencement of employment, strike or lockout, commencement or return from an unpaid leave of absence, change in worksite);
Dependent satisfying or ceasing to satisfy eligibility requirements (e.g., age, student status); or
Residence (e.g., change in place of residence of the employee, spouse, or dependent).
The cafeteria plan rules outline two requirements for employees to change their election mid-year based on one of these “change in status” events:
The change in status event must occur; and
The election change must satisfy the “consistency rule”.
With respect to health coverage, the “consistency rule” provides that an employee’s mid-year election change qualifies if it is “on account of and corresponds with a change in status that affects eligibility for coverage under an employer’s plan.”
The consistency rule therefore has two required conditions:
The election change requested must be consistent with the event (i.e., be on account of and correspond with the event); and
The event must cause the employee, spouse, or dependent to gain or lose eligibility for coverage.
The Change in Residence Permitted Election Change Event
Employees may experience a permitted election change event upon the employee’s, spouse’s, or dependent’s change in residence. Because the change in residence event is one of the “change in status” events described above, any such event must satisfy the “consistency rule”. The key limiting factor on when a change in residence will permit an election change is whether the move affects the individual’s eligibility for coverage.
Where the Change in Residence Does Not Affect Plan Eligibility: No Election Changes Permitted
Many times when an employee, spouse, or dependent changes residence, it has no effect on their eligibility for the health plan. In these circumstances, the employee does not experience a permitted election change event—which means that no mid-year election changes are allowed as a result of the move.
Where the Change in Residence Does Affect Plan Eligibility: Election Changes Permitted
Where an employee’s, spouse’s, or dependent’s change in residence does affect their eligibility for the health plan, the employee experiences a permitted election change event. The event permits the employee to change their election in a manner that is consistent with (i.e., on account of and corresponds with) the event.
If the move makes new plan options available, the employee can change their election to one of those newly available plan options. If the move causes the elected coverage to be of little or no value to the employee, spouse, or dependent, the employee can drop coverage for the affected family members or move to a different plan option that provides coverage in the employee’s, spouse’s, or dependent’s new place of residence.
Common change in residence events that affect plan eligibility include moving out of the HMO regional service area (losing eligibility for the HMO), moving into the HMO regional service area (gaining eligibility for the HMO), a child moving to attend college (gaining or losing eligibility for an HMO), a spouse moving into the country (gaining eligibility for the health plan), and a spouse leaving the country (losing eligibility for the health plan).
Employee Moves Out of HMO Regional Service Area
Example:
Wade Watts works for Gregarious Simulation Systems (GSS) in Oklahoma City.
He is enrolled in the GSS employer-sponsored group health plan in an HMO plan option.
Wade moves to Columbus, which is outside of the HMO regional service area.
GSS does not offer an HMO that covers the Columbus region, but the company does offer a PPO that provides coverage nationwide.
Result:
Upon the move, Wade experiences a Section 125 permitted election change event that allows him to change his health plan election mid-year because the HMO plan option is now of little or no value.
He can move to the PPO option that provides coverage in his new place of residence, or he can revoke his health plan election. Either option would be consistent with Wade’s change in residence outside the HMO regional service area.
Employee Moves Into HMO Regional Service Area
Example:
Helen Harris works for OASIS Inc. in Atlanta.
She is enrolled in the OASIS employer-sponsored group health plan in the PPO plan option that provides coverage nationwide.
She does not reside in the regional service area for the company’s HMO plan option.
Helen moves to Shermer, Illinois, which is within the regional service area for the HMO plan option.
Result:
Upon the move, Helen experiences a Section 125 permitted election change event that allows her to change her health plan election mid-year because she has gained eligibility for the HMO plan option.
She can change her election mid-year to the HMO plan option because she now resides in the plan’s regional service area, or she can maintain her current PPO election that continues to provide coverage.
Employee’s Child Moves to Attend College
Example:
Nolan Sorrento works for Innovative Online Industries (IOI) in Columbus.
His family is enrolled in the IOI employer-sponsored group health plan in an HMO plan option.
Nolan’s child Ben moves to Berkeley to attend college, which is outside the HMO regional service area.
IOI does not offer an HMO that covers the Berkeley region, but the company does offer a PPO that provides coverage nationwide.
Result:
Upon Ben’s move, Nolan experiences a Section 125 permitted election change event that allows him to change his health plan election mid-year because the HMO is now of little or no value to his child.
Nolan (employee) and Ben (child) can move to the PPO option that provides coverage in Ben’s new place of residence, or Nolan can revoke Ben’s health plan election. Either option would be on account of and correspond with Ben’s change in residence outside the HMO regional service area.
Employee’s Spouse Moves into the U.S.
Example:
Wade Watts works for Gunters Inc. in the U.S.
His spouse Samantha Cook lives in Vancouver while caring for her grandmother.
Wade is enrolled in the company’s employer-sponsored group health plan.
Samantha is not enrolled as a spouse in Wade’s plan because the Gunters Inc. plan does not provide coverage outside of the U.S.
Samantha moves to the U.S. to reside with Wade after her grandmother’s passing.
Result:
Upon Samantha’s move, Wade experiences a Section 125 permitted election change event that allows him to change his health plan election mid-year because his spouse has gained eligibility for the plan.
Wade can enroll Samantha (spouse) mid-year upon her change in residence to the U.S.
Employee’s Spouse Moves Out of the U.S.
Example:
Toshiro Yoshiaki works for Halcydonia Interactive in the U.S.
Toshiro and his spouse Akihide Karatsu are enrolled in the company’s employer-sponsored group health plan, which does not provide coverage outside of the U.S.
Akihide (spouse) moves to Japan to attend to family matters.
Result:
Upon Akihide’s move, Toshiro experiences a Section 125 permitted election change event that allows him to change his health plan election mid-year because his spouse has lost eligibility for the plan.
He can revoke his spouse’s coverage mid-year upon Akihide’s change in residence outside the U.S.
What About Dental and Vision Coverage Election Changes?
The same permitted election change event rules described above also apply to an employee’s dental and vision plan elections. However, unless the employee is enrolled in a dental HMO plan option or moves into a DHMO regional service area, it is unlikely that a change in residence will affect eligibility for these plan benefits. As with the medical plan, a change in residence must affect the employee’s, spouse’s, or dependent’s eligibility for dental/vision coverage to create a permitted election change event. Where the move does not affect eligibility for the dental or vision plan (i.e., it does not cause the coverage to be newly available or be of little or no value to the individual), employees cannot make any changes to their dental/vision elections.
What About Health FSA Election Changes?
As with the medical plan, a change in residence must affect the employee’s, spouse’s, or dependent’s health FSA eligibility to create a permitted election change event. A change in residence generally will not affect eligibility for the health FSA. Accordingly, employees typically cannot change their health FSA election upon a change in residence.
Note: An exception would be if the employee moves outside the U.S. and is no longer on the U.S. payroll. In that case, the employee will generally lose eligibility for the health FSA and correspondingly be able to revoke the election.
What is a Change in Residence?
There is no formal definition or exact timeframe to determine the “residence” status that applies for purposes of the change in residence permitted election change event. The analysis is based on all facts and circumstances.
On one hand, clearly an individual’s vacation is not a change in residence and therefore cannot give rise to a permitted election change event. On the other hand, if the individual is moving for a period of time sufficient to reasonably refer to the move as a change in residence (e.g., will have a new mailing address), that relocation can give rise to a permitted election change event. In that situation, both the individual’s move to the new place of residence and back to the original place of residence (e.g., outside of the U.S. and back into the U.S.) can give rise to a permitted election change event. For example, if an employee’s spouse was changing residence by moving outside the U.S. for a six-month period, the employee could drop the spouse from coverage upon departure and enroll the spouse again upon return.
While the determination as to whether a move qualifies as a change in the individual’s residence is not always precise, it also generally does not present an issue in practice. Upon the move, the employee will certify to the change in residence. In most cases, there will be no reason for the employer to question that certification unless the employer has reason to believe the employee’s certification is incorrect (e.g., it is known to the employer that the individual’s change in location is merely the result of a short vacation). It is unlikely that employees would attempt to make an election change based on a brief trip.
For more details: Substantiation of Mid-Year Permitted Election Change Events
Important Caveat #1: Insurance Carrier or Stop-Loss Provider Approval
Although a change in residence affecting plan eligibility creates a permitted election change event under Section 125, insurance carriers and stop-loss providers are not required to accommodate change in residence enrollments. Accordingly, employers processing a mid-year enrollment election change request based on a change in residence should first confirm that the insurance carrier (or stop-loss provider for a self-insured plan option) will accept the enrollment.
Important Caveat #2: Cafeteria Plan Terms
Although most cafeteria plans are designed to permit election changes to the maximum extent permitted, the Section 125 rules do not require the cafeteria plan to accommodate any mid-year changes to employees’ pre-tax elections. Accordingly, as with all aspects of the Section 125 permitted election change events, cafeteria plans are not required to offer election changes based on a change in residence.
Note: The HIPAA special enrollment rules do require the employer-sponsored major medical group health plan to accommodate certain mid-year enrollments.
Employers processing a mid-year enrollment election change request based on a change in residence should first consult the cafeteria plan document terms to confirm that plan accommodates the request. If the plan terms do not directly address change in residence events, the employer can use its discretionary authority to interpret those plan terms on a consistent basis to incorporate the change in residence event.
Summary
Employers and employees alike are often confused about if/when mid-year election changes are permitted based on a change in residence. The confusion is generally derived from the fact that the consistency rule’s application to a change in residence will lead to different outcomes depending on the circumstances. In short, if the move does not affect plan eligibility, no election change is permitted. However, where the employee’s, spouse’s, or dependent’s move affects their eligibility for health plan coverage, the employee can make a mid-year health plan election change that corresponds with the individual’s change in residence.
Relevant Cites:
Treas. Reg. §1.125-4:
(c) Changes in status.
(1) Change in status rule. A cafeteria plan may permit an employee to revoke an election during a period of coverage with respect to a qualified benefits plan (defined in paragraph (i)(8) of this section) to which this paragraph (c) applies and make a new election for the remaining portion of the period (referred to in this section as an election change) if, under the facts and circumstances—
(i) A change in status described in paragraph (c)(2) of this section occurs; and
(ii) The election change satisfies the consistency rule of paragraph (c)(3) of this section.
…
(2) Change in status events. The following events are changes in status for purposes of this paragraph (c):
…
(v) Residence. A change in the place of residence of the employee, spouse, or dependent.
…
(3) Consistency rule.
(i) Application to accident or health coverage and group-term life insurance. An election change satisfies the requirements of this paragraph (c)(3) with respect to accident or health coverage or group-term life insurance only if the election change is on account of and corresponds with a change in status that affects eligibility for coverage under an employer's plan. A change in status that affects eligibility under an employer's plan includes a change in status that results in an increase or decrease in the number of an employee's family members or dependents who may benefit from coverage under the plan.
…
Example (4).
(i) Employer R maintains a calendar year cafeteria plan under which full-time employees may elect coverage under one of three benefit package options provided under an accident or health plan: an indemnity option or either of two HMO options for employees who work in the respective service areas of the two HMOs. Employee A, who works in the service area of HMO #1, elects the HMO #1 option. During the year, A is transferred to another work location which is outside the HMO #1 service area and inside the HMO #2 service area.
(ii) The transfer is a change in status under paragraph (c)(2)(iii) of this section (relating to a change in worksite), and, under the consistency rule in paragraph (c)(3) of this section, the cafeteria plan may permit A to make an election change to elect the indemnity option or HMO #2 or to cancel accident or health coverage.
(iii) The change in work location has no effect on A's eligibility under R's health FSA, so no change in A's health FSA is authorized under this paragraph (c).
Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).
Brian Gilmore
Lead Benefits Counsel, VP, Newfront
Brian Gilmore is the Lead Benefits Counsel at Newfront. He assists clients on a wide variety of employee benefits compliance issues. The primary areas of his practice include ERISA, ACA, COBRA, HIPAA, Section 125 Cafeteria Plans, and 401(k) plans. Brian also presents regularly at trade events and in webinars on current hot topics in employee benefits law.
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