By participating in your employer’s benefit plan, you probably have a lot of questions. How can I spend my benefit money? How much do I need to contribute to my account? Can I make a benefit election change in the middle of the year? Making a benefit election change is not always straightforward or simple, but it is possible. Learn more about what conditions qualify for an FSA election change, DCAP election change, or HSA election change.
Guidelines for a Benefit Election Change
FSA Election Change
A healthcare Flexible Spending Account (FSA) is quite useful for covering common out-of-pocket expenses such as prescriptions, over-the-counter medications, co-pays, and other items and services. The worry for some people is that they may not be able to use the full FSA amount and they risk losing the money. Or they have a life-changing event in the middle of the year and need to put more into their account (up to the annual limit).
As such, “Can I make an FSA election change?” is a very common question. Generally speaking, healthcare FSA election rules are stricter than other accounts. Once your plan year starts, it is difficult to make a change unless you experience a qualified life event (as long as your employer’s plan allows it).
Here is a list of events that will allow you to update your health FSA election:
- Marital status update. Did you get married or separate from your significant other? Marriage, divorce, legal separation, annulment, and death of a spouse all qualify for an FSA election change.
- Addition or loss of a dependent. Did you get a new bundle of joy this year? By adding a child by birth or adoption, you can update your FSA amount. You can also make changes to your benefits account due to the loss or death of a dependent.
- Employment status changes. Has your job status changed? This includes loss of job, reduction in hours, strike or lockout, or change of workplace.
- Medicare or Medicaid eligibility. If you, your spouse or dependent becomes entitled to Medicare or Medicaid, then you may make an election change.
You may want to check your Summary Plan Description (SPD) before making changes, or talking to your HR or benefits representative.
DCAP Election Change
With dependent children (under age 13) or a dependent adult, many people sign up for a Dependent Care Assistance Plan (DCAP). You can use a DCAP for daycare, before and after school care, day camps, and more.
However, when there is as a change in cost or the facility closes, people wonder if they can change their annual election. With a DCAP, the IRS rules are more lenient than with a healthcare FSA. Here is a list of circumstances that will allow you to change your DCAP election (as long as your plan allows):
- Change in care providers. Have you started using a new care provider?
- Change to care hours. Did your care center reduce or extend hours?
- Facility closure. Did your child care center close?
- Increase or decrease in care costs. Did the cost of care go up (or go down)?
There is one big exception. If a relative provides child care for you, you cannot update your DCAP election for cost changes.
Also keep in mind that you cannot use your DCAP to reimburse yourself, your spouse, or another person living in your home for child care. However, if your child or another dependent is now staying home due to a care center closure or change in hours, you can update your DCAP election.
HSA Election Change
If you own an HSA, there is good news. You can update your HSA elections at any time for any reason. In order to make changes, talk to your benefits administrator or HR department.
If you change your HSA and high deductible health plan coverage from single to family (or vice versa), you may be eligible for an increase in contribution limits. Learn more here.
If you need to make a benefit election change, make sure to talk to your benefits representative first.