Understanding the Rules on Changing FSA Elections Mid-Year

Health flexible spending account (FSA) elections cannot be changed mid-year unless the employee has experienced a change in status that falls within one of the specific exceptions to the general rule.  One common question arises when an employee's medical condition or a healthcare provider's recommendations change mid-year, so that expected medical treatment is not required (or unexpected medical treatment becomes required).  Changes in the employee's need for medical treatment do not allow the employee to make changes regarding their health FSA elections mid-year.  IRS proposed regulations specifically offer a scenario where an employee made their FSA elections in anticipation of having a surgery, and the surgery never occurred so their health expenses were less than expected for the year.  The employee was not permitted to change their FSA elections due to the unforeseen event.  For more information on the rules governing health FSAs, visit Tax Facts Online. Read More: Link to Q3516.