Ask Penny: What happens to my FSA when I have a life event that changes my status, like a new baby?

June 21, 2021

Enrollment in health insurance and related benefit plans like Flexible Spending Accounts (FSA) typically occurs annually during your company’s open enrollment period. Outside of open enrollment, you can’t make changes to your coverage until the next open enrollment period unless you have a Qualifying Life Event (QLE).

A QLE is a status change that allows you to enroll in health plans or make changes to your existing coverage. When you experience a QLE, you become eligible for a special enrollment period during which you can make changes to your health plans, including adding or removing a spouse or dependents.

Events considered a QLE include:

  • A change in your legal marital status (e.g., marriage, legal separation, divorce, or death of a spouse).
  • A change in your employment status (for you, your spouse, or dependent) that leads to a gain, loss or change in eligibility for health benefits (e.g., job loss).
  • A change in your number of tax dependents.
  • A birth or adoption of a child, or placement of a child for adoption.
  • The death of a spouse or dependent.
  • A change in your dependent’s eligibility (e.g., your child reaches age 13 and is no longer eligible under a Dependent Care FSA).
  • For Dependent Care FSAs only, a change in childcare/elder care provider or cost of coverage, such as a significant cost increase charged by the current provider, or a change in the provider.

FSA contribution changes due to a QLE must reflect the nature of the event, such as:

  • If your dependent turns 26, you could decrease your FSA contribution to reflect the loss of a dependent.
  • If you adopt a baby, you may want to increase your elections to accommodate the new medical expenses and/or daycare costs.
  • If you get married, you might want to increase your elections to accommodate the new medical expenses for your spouse.
  • If your spouse loses their job (and therefore loses coverage) you, as the enrollee, can increase your FSA contribution.

If you experience a QLE like those described above, you can make changes to your FSA outside of open enrollment. You will need to show proof of the QLE with something like a marriage certificate, birth certificate or divorce decree. You will have at least 30 days from the QLE date to make revisions. In most cases, changes to your FSA will be effective the first of the month in which you incurred the QLE.

Contact your HR team to notify them of your QLE, verify documentation needs, and confirm your special open enrollment timeframe to update your FSA.