Can I Change My FSA Contribution Mid-Year?

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows individuals to set aside pre-tax money from their paycheck to cover eligible out-of-pocket healthcare costs. This financial tool provides a tax-advantaged way to pay for medical, dental, and vision expenses for the account holder, their spouse, and dependents. FSA contributions are generally elected for the entire plan year and are fixed, meaning changes are not usually permitted mid-year.

Understanding the General Rule

Flexible Spending Accounts operate under specific Internal Revenue Service (IRS) regulations. These regulations generally stipulate that an employee’s election for contributions is irrevocable once the plan year begins. This rule exists because FSAs offer significant tax advantages, allowing participants to pay for eligible expenses with pre-tax dollars, thereby reducing their taxable income. The pre-tax nature means money is deducted from an employee’s salary before federal income, Social Security, and Medicare taxes are calculated, leading to tax savings. The IRS sets annual contribution limits, which for 2025 are up to $3,300 per employer for a healthcare FSA. This strict adherence to the initial election helps maintain the integrity of the tax benefits associated with FSAs.

Qualifying Life Events Allowing Changes

While FSA contributions are generally fixed, IRS regulations outline specific “qualifying life events” (QLEs) that permit individuals to adjust their contribution amounts outside of the annual open enrollment period. These events are significant changes in an individual’s life that impact their health coverage needs or financial situation. Any change made must be consistent with the nature of the qualifying event.

A change in legal marital status, such as marriage, divorce, legal separation, annulment, or the death of a spouse, is a common QLE. For example, getting married might lead to an increase in anticipated healthcare expenses for a new household, potentially warranting an increased FSA contribution. Conversely, a divorce or death of a spouse could reduce the need for funds, allowing for a decrease.

Changes in the number of dependents also qualify for mid-year adjustments. This includes the birth or adoption of a child, placement for adoption, or the death of a dependent. Welcoming a new family member generally increases potential healthcare costs, making an upward adjustment to the FSA desirable. Conversely, if a dependent no longer qualifies for coverage, such as a child reaching a certain age, a decrease might be appropriate.

A change in employment status for the employee, spouse, or dependent that affects eligibility for health insurance benefits can also trigger a QLE. This could involve a new job, a change from full-time to part-time status, or a spouse losing their job, which might alter health coverage and associated out-of-pocket expenses. Losing health coverage due to an employment change might necessitate an increase in FSA contributions to cover new out-of-pocket costs.

Other qualifying events include significant changes in the cost or coverage of an employer’s health plan, if the plan explicitly allows for an FSA change based on such events. Eligibility for Medicare or Medicaid for the employee, spouse, or a dependent is also a QLE. Additionally, a judgment, decree, or court order, such as a qualified medical child support order (QMCSO), requiring an individual to provide health coverage for a child, can also permit a change to an FSA election.

How to Adjust Your Contribution

Once a qualifying life event has occurred, individuals must follow specific procedures to adjust their Flexible Spending Account contributions. It is important to act promptly.

The first step involves notifying the employer or the plan administrator as soon as possible after the qualifying event. Many plans require notification within a specific timeframe, often around 30 days, from the date of the QLE.

Individuals will typically need to provide documentation to verify the qualifying life event. Examples include a marriage certificate, divorce decree, birth certificate, adoption papers, or court orders.

The process for submitting the request usually involves completing specific forms provided by the employer or plan administrator. The requested change to the FSA contribution amount must be consistent with the qualifying event.

Effects of Contribution Changes

Adjusting Flexible Spending Account contributions mid-year has several financial and practical implications for the remainder of the plan year. The new election amount will generally be applied prospectively, meaning it affects future payroll deductions, not past ones.

Payroll deductions for the FSA will be adjusted for the remaining pay periods in the plan year to meet the new elected annual amount. For instance, if an individual increases their contribution, their per-paycheck deduction will rise to accumulate the higher total by year-end. Conversely, a decrease in the annual election will result in smaller deductions for the rest of the year.

The available balance in the FSA might be impacted depending on the plan’s rules. While many health FSAs make the full annual election available at the beginning of the plan year, contributions for Dependent Care FSAs are typically available as they accrue through payroll deductions. A change in contribution, especially a decrease, could mean a larger portion of the initial full amount available for a health FSA has already been spent relative to contributions made.

Changes are almost always prospective, applying to expenses incurred after the effective date of the change. Funds already contributed and expenses already reimbursed are generally not affected by the adjustment. The “use-it-or-lose-it” rule, which dictates that most unspent FSA funds are forfeited at the end of the plan year, still applies to the adjusted amount. Many plans offer a grace period of up to 2.5 months into the next year or allow a carryover of a limited amount (e.g., up to $660 for 2025) to mitigate forfeiture, and these provisions would apply to the new elected amount.