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Federal IRS Irrevocability Rule

Pursuant to Section 125 of the Internal Revenue Code, premiums paid by the employee for health, dental, and life insurance coverage are tax-exempt. The tax exemption applies only to premiums that are payroll deducted. For plans that provide the tax-exempt premium, the Internal Revenue Code prohibits changes in the employee's deduction during the plan year unless there is a qualifying change in status (qualifying event). If the State of Illinois is not in compliance, the plan could lose its qualification and/or employees could be subject to an IRS audit and be required to pay additional taxes and possible penalties.

The Irrevocability Rule applies to both increases and decreases in coverage, such as adding or dropping dependents from the health coverage or increasing or decreasing employee life insurance coverage.


Maintained by University Human Resources | Contact Information | Last Update: 03-August-2012 | ID: 88