What Are Qualifying Life Events for Mid-Year FSA/HSA Changes?

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During benefits open enrollment, an individual selects how much money they’d like to direct from each paycheck to their flexible spending account (FSA) and/or their health savings account (HSA) to use for that plan year (within allowable IRS limits). But what happens if something changes, and that amount they selected doesn’t make sense for them anymore? Can they change their FSA or HSA election amount mid-year? Well, that certainly depends on the situation.

We get it—life happens. An individual or a family’s whole world can change overnight, yet it seems like benefits elections made during enrollment are set in stone. However, that is not always the case! There are situations, called qualifying life events, that can allow an enrollee to change their FSA or HSA contribution amount or open a new account. FSAs and HSAs work differently, but we will address the main categories of qualifying events and how they may allow an employee to change FSA and HSA contributions.

A Word on HSAs:

Since the HSA is a personally owned account [similar to a 401(k)], an individual can make certain changes to their account at any time during the plan year. However, changing the election amount mid-year can affect how quickly they reach their individual- or family-based contribution limits that year. With that in mind, this article covers certain times when an account holder may want to make changes to their HSA contribution limits.

Dependent Changes and Children’s Eligibility

What is this?

Dependent changes include the birth or adoption of a child who could be claimed as a dependent, while children’s eligibility refers to age-related coverage changes when a dependent ages out of parental insurance coverage, which is typically under age 27.

Additionally, if a child ages out of Dependent Care FSA coverage at age 13, or if a child or spouse becomes mentally or physically incapable of caring for themselves, this can be a qualifying event.

What can be changed in these events?

An individual can change their FSA contribution or election, meaning that in any of these cases, they can either modify the contribution amount for their FSA or open an FSA mid-year if they don’t have one.

They can also change their contribution or election for a Dependent Care FSA if their child ages out or if a child or spouse becomes physically or mentally incapable of caring for themselves. They can change the amount contributed to the HSA for these qualifying events, as well.

Marital Status Changes

What is this?

Marital status changes include getting married, divorce, annulment of a marriage, death of a spouse, or legal separation.

What can be changed in these events?

Any one of these changes relating to marital status qualify for an FSA contribution or election change and an HSA contribution or election change.

Residence Changes

What is this?

A residence change qualifies if one moves to a new home such that it affects their coverage. For example, moving outside of the service area or to a new state can be a qualifying life event. However, it’s best for employees to check plan documentation or with their plan administrator to understand if a move is a qualifying event.

What can be changed in these events?

A change in residence that affects benefits coverage qualifies for FSA and/or HSA contribution or election changes. (Again, it is wise to check with the plan).

Employment Changes

What is this?

Employment changes include getting a new job, changing from full-time to part-time (and vice versa), taking a leave of absence, going on furlough, or returning to work after a leave of absence or furlough.

What can be changed in these events?

For any of these qualifying employment changes, an individual can choose to change their FSA and/or HSA contribution amount or election. For example, if an employee goes on leave to care for a loved one who is sick, they can choose to increase the amount contributed to their FSA each month in case their health care spending has increased.

Health Care Insurance Coverage Changes

What is this?

If there is a change in the individual’s health care insurance or a spouse’s insurance that covers them, that can be a qualifying event. This can include receiving Medicare/Medicaid, or if the individual changes insurance coverage due to job termination or being hired by a new company.

What can be changed in these events?

For these events, one can change their contribution or election for an HSA, but these do not qualify for FSA changes because the individual would be starting with new benefits, meaning their previous FSA plan would not carry over to their new plan. HSAs can travel with an individual throughout employers and job changes, as well as health plan changes, because it works more like a 401(k) in that regard.

Care Provider Changes (Dependent Care FSA Only)

What is this?

A care provider change means that an individual switched to a different child-care provider (a new day care program, a new babysitter) or a different elder care provider (a new assisted living facility or home-visit nurse). Changes could also include having a new child in dependent care, or changing the number of hours of care required for a child or an elder adult. If the cost of care increases, that can also be a qualifying life event.

What can be changed in these events?

These events only apply to changes in contribution or election of the Dependent Care FSA, not the health care FSA or the HSA. Changes to type, hours, or cost of dependent care qualify for an individual to adjust the amount they contribute to a Dependent Care FSA, or can qualify for them to open an account if they don’t have one.

A Final Note on Qualifying Events for FSA/HSA Changes Mid-Year

Though individuals may have options to modify their FSA or HSA choices for qualifying events, they should continue to thoughtfully choose the best benefits options for them at the time of open enrollment—in anticipation of any major life events that may be on the horizon. It is best for them to consult their human resources representatives or benefits administrators to ask about the ability to modify a plan while enrolling.

Not all employers allow mid-year benefits changes, and others may require employees to file changes within 30 days of the qualifying event, so it is important that individuals learn about their company’s policy when making FSA/HSA selections. In addition, employees—as well as employers and benefits advisors—can visit our Coronavirus Resource Center for more information on qualifying events and timelines in light of the pandemic.

As mentioned above, HSAs have more flexibility for changing the contribution amount, so long as it stays under the IRS-mandated annual maximum. But keep in mind that many employers limit the number of changes for HSA contributions to once a month at most because of the administrative cost to update an account. This is something else to check on before deciding an HSA contribution amount.

At the end of the day, an FSA and an HSA should work to meet individual and family needs. That’s why it’s helpful to understand what situations qualify to make mid-year modifications to benefits plans!

Want to keep these FSA qualifying events handy? Download this quick guide so you’ll know when you qualify for account changes at a glance.

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About the Author:
Diana Bauza is a content writer based in the Greater Philadelphia area. She writes about products and services in the health and technology industries, with the goal of empowering consumers with quality information to help them make decisions that best serve their needs.