Can You Change FSA Contribution at Any Time?

A Flexible Spending Account (FSA) offers a tax-advantaged way to pay for eligible healthcare or dependent care expenses. Contributions are typically elected once a year during open enrollment and are generally irrevocable for the plan year.

Permissible Events for Contribution Changes

While FSA contributions are generally set annually, certain specific circumstances, known as qualifying life events (QLEs), allow individuals to adjust their contributions outside of the open enrollment period. These events are defined by the IRS and plan administrators.

A change in legal marital status, such as marriage, divorce, legal separation, or the death of a spouse, is a common QLE that permits an FSA election change. A change in the number of dependents, including the birth or adoption of a child, placement for adoption, or the death of a dependent, also allows for adjustments. If a dependent reaches an age where they are no longer eligible for certain care, such as a child turning 13 for a Dependent Care FSA, this also qualifies.

Changes in employment status for the employee, their spouse, or a dependent that affect benefit eligibility can also trigger a permissible change. This includes starting a new job, losing a job, or changing from full-time to part-time employment. For Dependent Care FSAs, a significant change in dependent care costs or a change in the care provider often qualifies for a mid-year adjustment. Any requested change in contribution must be consistent with the nature of the qualifying event.

Steps to Adjust Your Contribution

After experiencing a qualifying life event, individuals seeking to adjust their FSA contribution must follow a specific path. The initial step involves promptly notifying the employer or the FSA plan administrator about the qualifying event. This notification typically needs to occur within a limited timeframe, often 30 to 60 days from the date of the event.

Following notification, individuals will generally be required to provide necessary documentation to verify the qualifying event. This documentation can include a marriage certificate, divorce decree, birth certificate, or adoption papers, depending on the specific QLE. The employer or plan administrator will then provide the required forms that need to be completed to request the contribution adjustment.

Once the request is processed and approved, the change in payroll deductions usually becomes effective with the first payroll period following approval. For events like the birth or adoption of a child, the change may be retroactive to the date of the event, consistent with IRS regulations. It is always advisable to confirm specific timelines and documentation requirements with the plan administrator.

Effects of Contribution Adjustments

Adjusting an FSA contribution mid-year due to a qualifying life event has specific financial and practical implications. If an individual decreases their contributions, the new, lower annual election amount becomes the maximum available for reimbursement. Reimbursement is limited to the new lower annual election or the amount actually contributed to date, whichever is less. Any amounts already reimbursed that exceed the new election may need to be addressed according to plan rules.

If contributions are increased, the remaining payroll deductions for the year are typically adjusted to reach the new, higher annual election amount. For healthcare FSAs, the full adjusted annual amount is generally available for reimbursement from the effective date of the change, even if the total amount has not yet been fully contributed through payroll deductions. This immediate access to the full election is a distinct advantage of healthcare FSAs.

The “use it or lose it” rule, where unused funds are typically forfeited at the end of the plan year, still applies to the adjusted annual amount. Any grace period or carryover provisions offered by the plan also apply to this adjusted amount. For Dependent Care FSAs, reimbursements are typically limited to the amount already contributed to the account, meaning funds are only available as they accrue.