Election Change

[Guest Triathalaw]

A friend presetned this scenario, and I am having a hard time coming up with an argument that allows him to change his election. Here's the situation if anyone has any thoughts:

Employee is expecting a baby to arrive in 2004, and expects to have about $4,000 in birth-related expenses, so in November 2003, he makes a 2004 Health FSA election for $4,000. Baby is actually born in 2003, and the birth expenses are only $1,000 due to a voluntary reduction in the charge for the birthing service. The birthing service is is not billed until 2004, and is reduced from 4000 to 1000 after it is billed.

I think if its not too late under the employee's plan, the 2003 election could be changed due to the change in family status, but does anyone see a way to change the 2004 election?

[Guest JerseyGirl]

We would need to know when this is all supposed to be taking place. Timing is everything.

If the 2003 election can be changed (new baby creating a legitimate change in status), then this must all be happening before the 2004 benefits have become available. Therefore the election for 2003 could be increased by the $1000.00 necessary to cover the additional expense created by the early arrival. I will assume the employee has enough income to accommodate re-direction of an additional $1000.00 in the last few weeks of the year. If in fact the new plan year has not started (i.e., it is still December 2003), I believe the election for 2004 could be revised. Once you are into the first pay period of the new (2004) plan year, and the benefits are now actually available, I do not see a way that lowering the election could be allowed.

The fact that the birthing services were billed in 2004 has no bearing on the situation, since the services were rendered in 2003. Theyare eligible for reimbursment only through the 2003 plan year.

[Guest LisaAZ]

Jersey Girl is right. Additionally, my understanding is the qualifying event needs to tie directly to the requested change. Therefore, the birth of a child would only allow the employee to INCREASE their election, not decrease it (though this is a moot point since you're talking different calendar years).