Chuck Thornton
New Member
- 2
We're brokers for an employer group, and our client has asked a question that we can't seem to nail down an answer to.
Because the pandemic could generate a change in status that could allow a mid-term change in the elected contribution amount for a health FSA, this question was posed:
What happens if an employee makes a midterm change to the elected contribution amount that makes it LOWER than the amount that has already been paid out in the current year?
For example (using simple figures), suppose Bob at open enrollment originally elected to contribute $1200 annually to his health FSA. In February, he submits and receives reimbursement for an FSA claim of $1000. Then, due to a qualifying status change, in April he asks to change his annual contribution to $600.00, which is $400 LESS than what he's already been reimbursed through the account.
What does the employer do? Can the employer not allow the change? Or allow a change to the contribution only to an amount equal to or greater than the amount of the existing reimbursement (in this case, only allow a change in contribution to $600 or more)?
If the employee wants to DROP the FSA election in this example, would that be allowed?
In searching for guidance online, I've found plenty of sources that say the pandemic could trigger allowable status-changes that would allow an employee to change his FSA election. And that if an employee quit or was fired with more reimbursed than contributed to the health FSA, the employee wouldn't be responsible for the overpayment.
But I haven't found anything addressing this specific situation. Is there guidance? Or something that says the employer has to allow the change?
Thanks for any help you can give me.
Because the pandemic could generate a change in status that could allow a mid-term change in the elected contribution amount for a health FSA, this question was posed:
What happens if an employee makes a midterm change to the elected contribution amount that makes it LOWER than the amount that has already been paid out in the current year?
For example (using simple figures), suppose Bob at open enrollment originally elected to contribute $1200 annually to his health FSA. In February, he submits and receives reimbursement for an FSA claim of $1000. Then, due to a qualifying status change, in April he asks to change his annual contribution to $600.00, which is $400 LESS than what he's already been reimbursed through the account.
What does the employer do? Can the employer not allow the change? Or allow a change to the contribution only to an amount equal to or greater than the amount of the existing reimbursement (in this case, only allow a change in contribution to $600 or more)?
If the employee wants to DROP the FSA election in this example, would that be allowed?
In searching for guidance online, I've found plenty of sources that say the pandemic could trigger allowable status-changes that would allow an employee to change his FSA election. And that if an employee quit or was fired with more reimbursed than contributed to the health FSA, the employee wouldn't be responsible for the overpayment.
But I haven't found anything addressing this specific situation. Is there guidance? Or something that says the employer has to allow the change?
Thanks for any help you can give me.
