Q. One of our employees elected to contribute $2,500 to his health Flexible Savings Account (FSA) for 2020 to cover the expenses of anticipated elective surgery. Due to the COVID-19 pandemic, the surgery has been postponed indefinitely. The employee has asked if he can reduce his health FSA election for the rest of the year in order to save money.

Can we allow him to make this change?


A. Unfortunately, employees can’t change their health FSA elections under the circumstances you describe. Health FSA elections are irrevocable during a plan year unless an event occurs that fits within one of the exceptions available under applicable regulations or other IRS guidance. A change in the availability of medical services doesn’t fall within the allowable exceptions. Nor does a change in financial circumstances such as your employee’s desire to save money.

Unless your employee experiences an event that falls within the exceptions applicable to health FSAs (for example, a change in employment status), your employee will have to wait until the next open enrollment period to change his health FSA election.

You may wish to remind your employee that he may be able to use the funds by submitting other eligible expenses. You may also wish to consider amending your plan (if you haven’t already) to allow health FSA carryovers of up to $500 or to adopt a grace period, which would give employees extra time to use up remaining funds.