The IRS rules that allow mid-year changes in a Health Care FSA are much more restrictive than otherwise permitted for enrollment under a pre-tax health insurance plan or a Dependent Care FSA. While you may be allowed to make changes to other coverage options under some of the situations listed below, changes to your Health Care FSA are not permissible if:
- You move inside or outside of an HMO service area and change your health plan option.
- Your annual earnings decrease due to a change in your appointment percentage or other job change, and you still remain eligible to participate in the university’s Health Care FSA.
- Your anticipated health/dental/visions costs increase or decrease due to unanticipated factors. Some examples include the following situations:
- You funded your FSA with an expectation of having LASIK eye surgery and were advised you were not a good candidate for surgery.
- You funded your FSA with an expectation of having extensive dental work done. Schedule issues by your dentist’s office resulted in the needed work to be carried over several months, and all of the work could not be completed before the end of the plan year.
- You funded your FSA with an expectation of having limited out-of-pocket expenses for the year. Midway through the year, your dependent required outpatient mental health treatment that was only partially covered by your health plan, resulting in significant out-of-pocket expenses.
- You funded your FSA with an expectation of continued use of a particular prescription drug at a fixed co-pay, amount. Your physician determined it was necessary to change the medication to a drug with a higher co-pay, or your condition improved and you no longer needed to take the drug.
These are only a few examples, but the IRS has ruled that the employee’s intent when signing up for a Health Care FSA is not relevant. The Health Care FSA remains available to reimburse other out-of-pocket medical expenses and a mid-year change is not allowed under these circumstances. Please keep this in mind when deciding how much to contribute to a Health Care FSA. You forfeit any contributions you cannot claim.
The following information lists permissible events that allow you to make a mid-year change in your Health Care FSA and the corresponding election change that may be made. You must notify Benefits Support at 888-659-3616 within 30 days of the event and be prepared to provide documentation of the change within 30 days of the event:
- Change in Your Legal Marital Status by marriage, death of spouse, divorce; or annulment. If you marry, you may increase your election when a family member is added; or decrease your election if: you, your spouse or dependents become eligible under your new spouse’s employer’s health care FSA plan; and your spouse is a participant in his or her employer’s plan, and coverage for the affected individual becomes effective or is increased under the other employer’s plan. If you cease to be married, you may decrease your election for your former spouse who loses eligibility. You may enroll in or increase your own election only if you have lost coverage under your former spouse’s health care FSA plan.
- Change in Number of Your Tax Dependents by birth, death, adoption, or placement for adoption. If you gain a dependent, you may enroll in or increase your election for the newly acquired dependent. If you lose a dependent, you may decrease your election for the dependent who loses eligibility.
- Changes in Employment Status and Leaves of Absence. Changes that affect the eligibility of the employee, the employee’s spouse, or the employee’s dependent, including termination or commencement of employment; strike or lockout; commencement of or return from an unpaid leave of absence. If you terminate employment or go on an unpaid leave of absence, you may change your election amount or terminate coverage if some other qualifying change in eligibility occurred during that leave. If you return from unpaid leave of absence, you may start a Health Care FSA or change your election amount if some other qualifying change in eligibility occurred during the leave. If your spouse terminates employment, or goes on an unpaid leave of absence, you may enroll in or increase your election if your spouse or dependent loses eligibility for participation in their employer’s health plan. If your spouse or dependent commence employment or returns from an unpaid leave that triggers a gain in eligibility under his or her employer’s plan, you may decrease your election if your spouse or dependent gains eligibility and enrolls in his or her employer’s health plan. An increase in hours does not allow you to change your Health Care FSA.
- Certain Judgments, Decrees, or Court Orders. If a judgment, decree, or court order from a divorce, legal separation, annulment, or change in legal custody requires that accident or health coverage for your dependent child (including a dependent foster child) be provided by you, you may change your Health Care FSA election to provide the child with corresponding coverage. Your spouse, former spouse, or other individual, you may change your Health Care FSA election to decrease corresponding coverage for the child if the other individual actually provides the coverage.
- Eligibility for Medicare and Medicaid. If you, your spouse, or your dependent are enrolled in an Ensign Services Health Plan and become entitled to and enroll in Medicare or Medicaid (other than coverage solely for pediatric vaccines), then for that individual you may decrease your Health Care FSA election if the Medicare/Medicaid coverage is more comprehensive, or you may increase it if the Ensign Services Health Plan was more comprehensive. If you lose eligibility for Medicare or Medicaid, then for that individual you may increase your Health Care FSA election, or decrease it if the Ensign Services Health Plan is more comprehensive.