Change in Status Events for Health Flexible Spending Accounts and Dependent Daycare Accounts
Elections made for health flexible spending accounts (FSA) and dependent daycare accounts normally cannot be changed once the plan year has started. While elections generally cannot be changed, there are certain circumstances when the IRS has said exceptions can be made.
The general change in status categories for health FSAs and dependent daycare accounts include:
- Change in Employment Status
- Change in Number of Dependents
- Change in Martial Status
Generally speaking, the type of election change should be consistent with the change in status event. For example, if an employee gets married, they generally would increase their health FSA election. On the other hand, if an employee is enrolled in dependent daycare and their child is no longer under the age of 13, they can generally lower or cancel the election.
While the IRS allows for elections to be changed in certain situations, an employer is not required to design their plan to allow for changes. The plan can be designed to not allow any changes, or only allow changes in limited situations. A plan may not be designed to allow for changes beyond what the IRS has outlined.
When election changes are requested by a participant, the employer should review and confirm the event meets the requirements of changes allowed by the IRS and by the specific employer’s plan. Change in election requests should be handled consistently and documented properly. If a change is approved, the change should be communicated to all appropriate departments and vendors to ensure all records are accurate.
BusinessPlans, Inc. – myCafeteriaPlan does not intend to provide legal or tax advice and information contained in this article should not be interpreted as such. Regulations governing pretax plans are often open to interpretation and should be reviewed with your legal or tax advisor before making any decisions regarding your plan.