Change of Status before first payroll

[Guest BeneGal]

Calendar year flex plan. Employee elects $50 month for medical reimbursement. January 17th her husband who was unemployed at the time of enrollment (Dec 2002) now gets a job. Employee wants to increase from $50 to $300 using the "change in spouse's employment" reason which is a valid change of status. My thinking is no because the employment change doesn't directly impact the medical reimbursement category.

Is there ANY scenario where this change would be allowable? :confused: :confused: :confused:

[papogi]

Your thinking is right, but for another reason. Commencement of employment of an employee’s spouse (and the spouse gains eligibility for the new employer’s plan) will allow your employee to decrease or stop the Health FSA election. The consistency rules prevent your employee from increasing the account in this case. Had the spouse lost coverage mid-year and come on your employee’s plan, then the Health FSA may be raised. That’s an example of when an FSA may be raised.

[Guest many?s]

I t hink that they CAN increase the amount. She has a change in status- spouse commencing employment, and increasing the election CAN be consistent with that change, in that now, the employee's household has more disposable income to spend on medical expenses- dental work, vision care, etc., items that they most likely would have put off due to the situation of one income in the household.

I think you can make an argument that the change is consistent and the increase in election be allowed.

[papogi]

The spouse gaining employment and eligibility for another health plan means that the employee can drop health coverage for that spouse. Since a Health FSA is viewed as a health and welfare plan, the general thinking is that coverage can be reduced or dropped, along the same lines as the regular health coverage. Hopefully, the spouse’s new employer offers a Health FSA. If so, they can effectively increase their annual election by participating in that FSA, as well.

[Lisa Hand]

papogi is correct - consistency is defined by the relationship between the change which occurred and the change the participant wishes to make. Gaining other coverage is not consistent with increasing the Medical FSA, but rather as already stated consistent with decreasing or stopping the election. What expenses they intend to cover with this election or the fact they are now making more money has nothing to do with the evaluation since an increase or decrease in medical expenses during the plan year is not a valid change of status to change the medical FSA.