This post has been updated to include new IRS guidance issued on May 12, 2020.
We’re receiving a ton of questions regarding whether participants can adjust their contribution elections, and the answer is, it depends on the plan. Here are the two most common questions we are being asked.
Dear Gina – My doctor and dentist cancelled my appointments. Can I lower my Health FSA election during this pandemic?
Answer: Updated 5/14/2020. On May 12, 2020, the IRS issued guidelines allowing employers to amend their FSA plans to permit changes to annual elections or allow new elections. Refunds of previously contributed contributions are not permitted. Check with your employer to see if your plan to allows for mid-year changes to your healthcare FSA. As of today (April 27, 2020) the answer is no. Health Flexible Spending Accounts have always had very strict rules as to when you can start/stop or increase/decrease contribution elections. Changes to a participant’s election are only allowed in the case of an addition or loss of a dependent. While this pandemic has most likely changed your expense expectations, either up or down, unfortunately a change in expectations has never been an eligible reason to change your election. We will keep you posted if any special allowance is made due to the current pandemic.
Keep in mind that even if you had an elective procedure planned and/or a doctor’s appointment scheduled, we are hopeful that you will be able to use your full election prior to the end of the plan year. You might also consider other procedures/services/products that could utilize un-used funds. Remember, the CARES Act now allows for OTC medications to be eligible for reimbursement without a prescription – but be careful not to stockpile.
Please note that if you are an HSA participant, you can increase, decrease or cease your contribution at any time.
Dear Gina – I am enrolled in my company’s Dependent Care Assistance Plan (DCAP). Can I lower or stop my participation in the plan because my children are at home due to schools being closed during this pandemic?
Answer: Yes, DCAPs do allow you to make changes to your contribution due to a change in cost or coverage. Therefore, you can stop your participation because your need for daycare has stopped. Notify your Human Resource Manager as soon as possible and complete a “Change of Status” form within 30 days of the end of your Daycare expenses. When your need for daycare returns, complete another “Change of Status” form within 30 days of your need for daycare returns. You can also change the amount of your pay period contribution so you end the plan year having contributed as much as you need or up to $5,000 as allowed by the IRS.