Health FSA - MidYear Change

[Guest akwallace1]

We have an employee who enrolled in the health FSA with the intention of having surgery sometime during the year.

Now she has found out that she is pregnant, and can no longer have the surgery.

This is not a valid status to change to allow her to reduce her election, correct? Would it be advisable for the employer to make an exception in this case anyway, and allow her to reduce?

[papogi]

She can’t change the election. Remember that the tax benefits of an FSA are given to participants because of the “insurance” nature of FSA’s. There needs to be risk involved. If there were no risk, FSA’s would be nothing more than holding tanks for money, and no tax benefit.

Employees might choose a richer health plan if their employers offer it because they plan on going in to the doctor and expect something might be wrong in the coming year. If nothing turns out to be wrong, or they decide not to go to the doctor, the employee can’t then move down to a low option with lower payroll deductions.

The same is true for FSA’s. She took the risk by electing a higher amount. There is no legal way for her to lower or stop the account in this case.

[Guest MSMA]

...unless the baby is born within the plan year.....

[papogi]

But consistency rules will only allow the employee to start up or increase an existing health FSA upon the birth of a baby. The birth still won't help her drop or decrease this account.

[401 Chaos]

The pregnancy should, however, certainly increase her doctor visits and overall medical bills.