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

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.

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!