A Review of Change in Status Rules for Flexible Spending Accounts

A Review of Change in Status Rules for Flexible Spending AccountsAs we head into the popular open enrollment season for so many benefit plans, it is important for employers to have a strong understanding of when employee election changes are allowed under the IRS rules for Flexible Spending Accounts (FSAs). Before making a commitment to set aside money in an FSA, employees are often thinking about when and how they can make a mid-year change. While the change in status rules have been around for a while, they are often a source of questions and confusion for employees.  Gallagher Compliance has created this helpful, in-depth reference guide highlighting allowable and non-allowable changes.

In addition to highlighting some of the more common change rules, this reference piece also explains the consistency requirement which states that “the election change must be on account of and correspond with a change in status that affects eligibility for coverage under an employer’s plan.”

Also highlighted are some helpful reminders of common events that employers may get asked about which do not qualify as a status change. For example, pregnancy is NOT a qualifying event; however, the birth of the child can allow for a change in enrollment. While many rules are similar between medical and Dependent Care Assistant Program (DCAP) FSAs, the IRS rules do allow for some additional flexibility when it comes to dependent care.

If this article raises additional questions for your plan, contact us and we would be happy to address your needs.