FSA Mid Year Changes in Election

Under IRS Notice 2020-29, employers can allow for mid-year changes to employer-sponsored health care coverage, health FSAs and Dependent Care Accounts for 2020 calendar plan years.  

  • Employers may immediately allow participants in Health FSAs and Dependent Care FSAs to make changes to their elections including reducing or canceling their elections without the typically required change in life event, such as marriage or birth of a child.  Participants can also make a brand new election if none was made during Open Enrollment.  Important note: participants cannot cancel their election retroactively and receive a refund of their contributions.
  • The minimum new election amount for the Health FSA would be the greater of the claims paid year to date or the salary reduction contributions year to date. For employees who have spent more in their Health FSA than they have contributed, salary reductions would continue through the end of the plan year to fund the negative balance. 

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The above change is not mandatory.  Employers who want to allow election changes must make an amendment to their plan by December 31, 2021 (regardless of a plan's plan year).