When can you change FSA contributions outside of open enrollment?

A qualifying life event allows you to change your FSA contributions midyear

Brian Acton

By

Brian Acton

Brian Acton

Contributing Writer

Brian Acton is a contributing writer at Policygenius who covers personal finance, insurance, and other topics.

Published October 25, 2021|7 min read

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Flexible spending accounts (FSAs) are employer-sponsored accounts that allow employees to contribute funds directly from their paychecks, tax-free, to pay for out-of-pocket medical and dependent care costs. During the annual open enrollment period, an employee must elect how much to contribute to their FSA for the upcoming plan year. Generally, the employee can’t change their election amount outside of open enrollment unless they experience a qualifying life event (QLE). Common qualifying events involve changes to marital status, gaining or losing a dependent, or changes in employment status. However, the exact list of QLEs that an employer accepts may vary.

For 2021 FSA plans: As a response to the coronavirus pandemic, employers can allow employees to make midyear election changes without experiencing a QLE, but that policy is at the discretion of the employer and may or may not be permitted at your workplace. Check with your employer or FSA provider for details specific to your plan.

Key Takeaways

  • A qualifying life event (QLE) allows you to sign up for a flexible spending account (FSA) or change your annual contribution amount outside of the open enrollment period

  • Common QLEs include a change in your marital status, number of dependents, or employment status

  • When a QLE occurs, you have a limited time before and after the event, typically 30 to 60 days, to open an FSA or change your contributions

  • For 2021 plans, employers have the option of allowing employees to make FSA changes midyear without the need for a QLE

What’s a qualifying life event for an FSA?

A qualifying life event allows you to open an FSA or make changes to your FSA contributions for the year outside of open enrollment. Here are some of the QLEs that may motivate you to adjust your FSA contributions midyear:

  • Marriage

  • Death of a spouse

  • Divorce, legal separation, or annulment

  • The birth or adoption of a child

  • Gaining an eligible dependent, like an elderly parent

  • Death of a dependent

  • A dependent no longer qualifies for your plan, such as when your child ages out of eligibility at age 26

  • You, your spouse, or your dependent experience a change in employment that affects health insurance benefits

  • You receive a court order requiring you to provide health insurance for a child

  • You, your spouse, or a dependent gain or lose Medicare or Medicaid coverage 

  • You go on or return from leave under the Family and Medical Leave Act (FMLA) 

  • Your dependent care expenses change, such as when daycare tuition increases 

Keep in mind that the specific QLEs you can use to make election changes depend on what your employer and your FSA plan allow. Your plan may allow you to update your FSA contributions for all, some, or none of these QLEs.

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Qualifying life events for HSAs

If you participate in a health savings account (HSA), you don’t need to worry about QLEs because you can make changes to your HSA contribution amount at any time, as long as your specific HSA plan allows you to make changes. Not all employers or HSA plans give the option to change your HSA contribution during the year. Even though you don’t need to experience a QLE to update your HSA elections, you can treat many of the same life events as an opportunity to reevaluate your HSA contributions.

Considerations for common QLEs

The most common qualifying life events are usually tied to a change in marital status, number of eligible dependents, or employment status. Here are some of the common QLEs, and what to consider when adjusting your FSA contributions.

Your marital status changes

If you get married, you may want to enroll in an FSA or increase your existing contributions. You can use your FSA to pay for your spouse’s medical and dental expenses even if your spouse has a different insurance plan or if your spouse is enrolled in an FSA themselves. [1] Your annual FSA contribution limit won’t increase if you get married, but since each spouse could potentially have their own FSA, a married couple could contribute up to $5,500 to an FSA each year.

If you get divorced, separated, or your spouse passes away, you may not need to contribute as much to your FSA as you did before, especially if you primarily used the FSA for your former spouse’s expenses. If you don’t anticipate you or your dependents incurring as many medical costs, you may want to decrease your annual contribution. 

You gain or lose a dependent

The birth or adoption of a child is an important time when you may consider increasing your medical FSA contributions. You can use an FSA to pay for out-of-pocket costs the mother and newborn incur while at the hospital, as well as any ensuing follow-ups. And you can continue to use your FSA for your child’s expenses until the end of the calendar year in which they turn 26, as long as they’re still a dependent on your taxes.

If you plan on paying for childcare so that you can work, you may want a dependent care FSA. You can use DCFSAs to pay for eligible costs including au pairs, work-related babysitting, before and after-school programs, nannies, and daycare centers. You must be either working or looking for work, and if you’re married both spouses must be working or looking for work (unless one spouse is unable to work because of a disability). The child must be under age 13 and live with you more than half the year to qualify you for a DCFSA.

You can also use FSAs to pay for medical and dependent care expenses for adult dependents, such as an elderly parent or a spouse who isn’t able to care for themselves. If you become responsible for an adult dependent, you might wish to use that event to increase your FSA contributions.

The loss of an eligible dependent also counts as a QLE, and is a time you may want to decrease your FSA contributions. When your child turns 26 and isn’t a dependent on your tax return, you can no longer use your FSA on their expenses. Once your child turns 13, they are no longer eligible for dependent care FSAs.

Read more: 53 tax deductions and credits you can claim in 2021

Changes to your employment status

Changes to employment status for yourself, your spouse, and your dependents typically count as qualifying life events if they affect your health insurance. Of course, if you start a new job with an employer that offers an FSA you can enroll right away. But if an employer reduces work hours for yourself, your spouse, or your dependent and that reduction results in a loss of health coverage, you can use that QLE to increase or decrease your FSA contributions. This also applies if your spouse or your dependent loses their job and it affects their health insurance.

What happens to your FSA if you leave your job, voluntarily or involuntarily? Any funds that remain in your FSA go back to your employer, unless you are able to continue your health insurance under COBRA. If that happens, you can continue to spend any funds that remained in the account when you left your job.

If you know you will be leaving your job soon, you can try to spend the remaining balance in your FSA before your departure. If you spend the entire balance and you haven’t fully funded your elected annual contribution by the time you leave, your employer will be on the hook for the difference (but their expenses will be offset by any unused funds that other employees lose at the end of the year).

Dependent care expenses change

One last important QLE is specific to dependent care FSAs. If you experience a change in dependent care costs — such as if your daycare center dramatically raises tuition or you move your child to a more expensive daycare — you can increase your DCFSA contributions. If your coverage needs decrease — like if you remove your child from daycare or if your child’s daycare closes for the summer — you can claim a qualifying life event and reduce your contributions.

How to change your FSA contributions

If you already have an FSA, you can generally adjust your elections outside of open enrollment by filling out a change form. Some plans may allow you to complete this form online instead of requiring a physical form. If you don’t already have a health FSA or dependent care FSA, you will need to fill out the paperwork to open a new account. You may also be asked to submit supporting documents, such as a birth certificate, to prove that the qualifying event occurred.

Remember, your employer or third-party FSA administrator decides which QLEs to allow, so check your FSA plan details to see if your specific life event is covered as a QLE. The plan administrator also determines the exact process you need to follow to change your contribution amount. You generally have 30 or 60 days after the event to complete and submit the necessary paperwork, but you may be able to submit change requests before the event. Check with your employer and FSA administrator to find out the exact deadlines.

How much can you contribute to an FSA?

The annual contribution limit for an FSA is set by the IRS and is $2,750 for 2021 (the IRS hasn’t confirmed the 2022 limit yet). This contribution limit applies per employer, so someone who is married can still only contribute up to $2,750 to their individual FSA, but their spouse can also contribute up to the maximum.

The contribution limit for a dependent care FSA is $5,000 but that may be higher for some plans in 2021. Due to the American Rescue Plan Act of 2021, employers have the option to increase the contribution limit to $10,500 for 2021 plans.