Section 125 Annual Re-Enrollment: Do Employees Have to Re-Elect Every Year?

2026-10-11 • 8 min read

Section 125 elections must be made before the plan year starts and last for that year. Learn when employees must re-elect, how evergreen elections work, and what notice to send.

Quick Answer (as of 2026): Section 125 elections must be made before the plan year starts and generally cannot change until it ends. Employees do not always have to re-elect. If the plan document allows evergreen elections, last year's choices roll over unless the employee changes them, as long as the employer sends clear notice first.

Open enrollment for 2027 is close, and many employers ask the same thing: do employees have to sign up again for their Section 125 benefits, or can last year's choices carry forward? The answer sits in your plan document. This page shows the rule, the two ways to run enrollment, and the notice you need.

When must employees make their Section 125 elections?

Employees must choose their Section 125 benefits before the plan year begins. For a calendar-year plan, that means before January 1. The IRS states that participants "must elect the amounts and types of benefits to be received prior to the beginning of the plan year" (IRS cafeteria plan training, lesson 4).

The same IRS material says a plan generally may not let a participant revoke an election during the coverage period. Changes are allowed only for listed events, such as a change in status or a loss of other coverage. Our Section 125 qualifying event guide lists them.

What is an evergreen election?

An evergreen election, also called a rolling or passive election, is an election that continues into the next plan year without a new form. AssuredPartners describes it this way: "Current participants' elections continue to the next plan year unless the employee files an election not to participate."

The other method is an affirmative election, where each employee must log in or sign a form every year. Both methods can meet the rule that elections come before the plan year. The plan document must say which one you use.

Which benefits can roll over each year?

Premium-only benefits, such as medical, dental and vision premiums, are the usual candidates for rollover. Newfront, a benefits broker, says most employers limit rolling elections to those benefits.

Flexible spending accounts (FSAs) and health savings accounts (HSAs) are different:

Health FSA and dependent care FSA: Sources do not agree. HR Training Center says evergreen elections cannot be used for these accounts. Newfront says they are technically allowed but not advisable because of the use-it-or-lose-it rule. Most employers ask for a fresh FSA election each year.
HSA: Newfront notes that an HSA election cannot roll if the employee moves to a plan that is not a high-deductible health plan.

Check your own plan document before you decide. It controls what your plan can do.

Not sure what your plan document says about rollovers? Summit Health Benefits can read it with you and flag what to fix before enrollment opens. Schedule an enrollment review.

What notice must employers send before a rollover?

Employers should tell employees well in advance that their elections will roll over. HR Training Center puts it plainly: "You must notify employees well in advance that their elections will roll over automatically."

Newfront suggests the notice cover these points:

How the rolling process works.
Each plan option's employee premium cost.
How to decline coverage.
The deadline to choose something different.
That elections are locked for the year unless a permitted event occurs.
The employee's current elections.

Send it at every open enrollment, not only the first time.

What do employers save when employees re-elect?

Every pre-tax premium dollar is exempt from the employer share of Social Security and Medicare tax, which is 7.65 percent (IRS Tax Topic 751, 2026). An employee who elects $400 a month in pre-tax premiums saves the employer $30.60 a month in FICA. Ten employees saving that amount add up to $306 a month.

An employee who misses enrollment and loses the pre-tax election pays more tax, and the employer loses that savings. That is one reason many employers prefer rollover for premiums. Our guide to maximizing FICA tax savings shows the full math.

What about new hires?

New hires usually make their first election when they become eligible, not at open enrollment. AssuredPartners notes that elections new employees make within 30 days after hire can be effective back to the hire date. Your plan document sets the exact window.

Who handles this work, you or an administrator?

A Section 125 administrator keeps the written plan document, the summary plan description, the election forms and the rollover notice in line with each other. Summit Health Benefits provides a written plan document, a summary plan description and nondiscrimination testing support, and its plan documents are reviewed by ERISA attorneys.

Summit Health Benefits charges $35 per enrolled employee per month, paid from the FICA savings the plan creates. The employer still nets about $56 to $101 per enrolled employee per month. Use the Summit savings calculator to see your numbers, or read how to set up a Section 125 plan if you do not have one yet.

What should you do before open enrollment starts?

Work through this short list:

Read the election section of your plan document. Confirm whether it uses evergreen or affirmative elections.
Decide which benefits roll over. Require new elections for FSAs.
Send the rollover notice with the open enrollment packet.
Collect signed election forms that include an irrevocability statement.
Match payroll deductions to elections before the first paycheck of the new plan year.
File forms and notices together for your records.

Schedule an Open Enrollment Readiness Review With Our Benefits Experts

A Summit Health Benefits advisor checks that your plan document, election forms and rollover notice are in place before open enrollment starts.

Request My Enrollment Review

Frequently Asked Questions

Do employees have to re-enroll in a Section 125 plan every year?

Not always. A Section 125 plan can use affirmative elections, where employees choose every year, or evergreen elections, where last year's choices continue unless the employee changes them. The plan document must say which method applies.

What is an evergreen election in a cafeteria plan?

An evergreen election is a Section 125 election that rolls into the next plan year without a new form. The employee can still change or decline it during open enrollment. Employers should send notice before the rollover.

Can a health FSA election roll over automatically?

Sources disagree. HR Training Center says evergreen elections cannot be used for health FSAs. Newfront says they are technically allowed but not advisable. Most employers require a new FSA election each year, so check your plan document.

When is the deadline to make Section 125 elections?

The deadline is before the first day of the plan year. For a calendar-year plan, employees must choose before January 1. The IRS says participants must elect benefits before the plan year begins.

Can an employee change a Section 125 election after open enrollment ends?

Only after a permitted event, such as marriage, birth, divorce or loss of other coverage. The IRS says a plan generally may not let participants revoke elections during the coverage period. The change must also match the event.

What happens if an employee misses open enrollment?

It depends on the plan document. With evergreen elections, the prior choices continue. Without them, the employee may have no pre-tax coverage election and generally must wait for a permitted event or the next open enrollment.

Sources: IRS, Cafeteria Plans training, Lesson 4 (irs.gov); IRS Tax Topic 751, Social Security and Medicare Withholding Rates (2026); AssuredPartners, Section 125 Election Rules Snapshot; Newfront, Passive Enrollments with Rolling Elections; HR Training Center, Cafeteria Plan Election Options; Summit Health Benefits plan terms (2026).