What Are Qualifying Life Events and How Do They Affect My FSA?
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Qualifying life events can affect the type of coverage and contribution for health insurance, so it's important to understand what situations the FSA considers. While you can't change your contribution any time you want, FSA qualifying events mean you can change your coverage outside of the open period. We understand that saving on healthcare costs and maximizing your coverage is important. In this article, we'll look at qualifying events for health insurance and how they affect your contribution.
What Is a Qualifying Event for FSA?
A qualifying life event (QLE) is a change in your living situation that allows you to alter your FSA election. The event must align with the IRS requirements for QLEs and regulations in section 125 of the Internal Revenue Code. When you experience a qualifying life event, you can make changes or enroll in a health insurance plan outside the annual open enrollment period.
Changes in the following areas fall under the definition of a qualifying life event:
- Number of dependents
- Marital status, either a divorce or marriage
- Employment status — this includes hiring or termination and applies to employees, spouses and dependants that may affect eligibility
- Status of a dependant, for example, if a dependant attains a certain age
- Becoming entitled to Medicaid or Medicare, which only applies to health FSA
- A judgment, court order or decree that relates to a child's medical coverage, like a qualified medical child support order (QMCSO)
- Residential moves that affect coverage
- The death of your spouse or dependant
- Cost or coverage, which only applies to dependant care assistance plan (DCAP) changes, such as if you need to change your provider or rates or need additional care for dependants
The election change must be consistent with the qualifying event. For example, a spouse's death wouldn't qualify for an increase in your coverage. The change and the event must make sense and correlate with one another.
Can I Change Contribution Amounts to My Flexible Spending Account?
Maximizing your payroll allocations throughout the year is pivotal to reducing your bottom line, so knowing if you can change your FSA contribution at any time is essential. You can change your election and contribution amount as many times as needed during the open enrollment period. The changes that you have at the end of the season are final.
Unfortunately, outside of the open enrollment period, you are only allowed to make changes to your contributions if you experience a qualifying life event, and if your plan allows such changes. Your plan should describe what events will affect your coverage.
When Can I Change My Payroll Allocation?
You can change your payroll allocation for qualifying life events outside the yearly open enrollment period. These events fall into four main categories.
Health Coverage Loss
The following changes are events that alter health coverage:
- A change in employment status that causes a loss in coverage and affects eligibility for health insurance benefits(for yourself, a spouse or one of your dependents)
- If an employee is no longer eligible for Medicare, Medicaid or CHIP
- A change in a dependant's eligibility, such as a child turns 26 and loses coverage through a parent's health plan and no longer qualifies for coverage under a Dependent Care FSA (DCFSA)
Household Changes
These changes in a member's household can alter allocation:
- A change in legal marital status, including marriage, legal separation, divorce or death of a spouse
- The birth of a child, adoption of a child or placement for adoption
- The death of a dependent
Residence Changes
More than simply moving house, the following are the only residence changes that affect FSA election:
- A change in ZIP code or country of residence
- A student's change in location to attend school
- When a seasonal worker changes the location of where they work and live
- A move from a transitional house or shelter
Additional Qualifying Events
The following events can also change your payroll allocation:
- A change in the number of tax dependents
- An increase or decrease in income that changes the type of coverage qualification
- Becoming a U.S. citizen
- Any COBRA qualifying events, decrees, judgments or court orders
What Steps Should I Take if I Experience a Qualifying Life Event?
If you experience a QLE or have one coming up, contact your FSA administrator within 30 days of the occurrence and they will make the changes for you. It's important to remember that only some employers offer changes halfway through the year. Speak to your administrator to get clarity on the regulations surrounding your account.
Take Charge of Your Healthcare Costs With The Difference Card
Understanding how your qualifying life events affect coverage and contributions can be complicated. At The Difference Card, we simplify healthcare insurance for our clients while helping them to save money. Our Flexible Spending Accounts (FSA) enable you to take charge of your healthcare costs and save money. The plan covers IRS-eligible expenses and out-of-pocket healthcare costs—maximizing financial benefits and enhancing tax strategies.
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