Q.- We have a 7/1 FSA plan year. An employee elected to participate in the health FSA, but she did not realize she was ineligible since her husband’s health plan includes a health savings account. Can we let her revoke her FSA election?
A.- Maybe. It is our understanding that an election may be corrected when there is clear and convincing evidence that a mistake has been made. If the participant made a mistake in making the election (she didn’t know she couldn’t participate in the FSA with her husband’s HSA health coverage), the IRS might approve the mid-year election change. The argument for allowing the change is that this really isn’t a “change,” the election was bad from the start.
