Change in Status

[Guest DK Ellerson]

An employee who works 30 hours a week is eligible to participate in an FSA. Would it be considered a change in status, which would allow a mid-year election change, if an employee working 40 hours a week drops to 30?

Thanks,

[mroberts]

I must be missing something. Why would that be a status change? I'm sure the eligibility definition wasn't meant to read all employees working only 30 hours per week are eligible. It's all employees working at least 30 hours per week. Now if the employee fell below 30 hours per week, that would necessitate a change since he is no longer eligible for the benefit.

[KIP KRAUS]

I agree with mroberts.

[Guest DK Ellerson]

Yes, that is my understanding as well. The employee is arguing that because they are getting a reduction in income, that should qualify as a change in status, and therefore they should be able to decrease their election.

I just put the scenario out there to get some feedback, and see if anyone had ever addressed the situation differently.

Thanks for your responses.

[papogi]

One would think that salary decreases should count as cost increases (since the benefit percentage of their pay is going up when their pay decreases), but the IRS doesn't see it that way. Even if they did, cost and coverage change rules don't apply to health care FSA's anyway.