Mid year participation for new participants

[Guest AEA]

Where do the regulations allow an employee to join a health FSA during the middle of a year? Does that new participant get to defer the full amount allowed under the plan or is it prorated? Does new participant get reimbursements for the full plan year or only after participation?

Is this something allowed under the law or are people just doing it?

I have a merger situation, so the plans involved don't address this but appear to allow an employee into the plan during the year (silent re: proration of contributions)

[Lisa Hand]

The regulations permit changes based on valid change of status events which are consistent with the change which is being requested. Plan documents may further restrict this or not permit them at all. You should consult the final regulations on change of status issued March 28, 2000 for a list of valid changes and how the consistency rule applies.

Pro-rating is a plan design issue.

Expenses are eligible only if incurred during the period of participation in the plan.