Q.- A participant wants to enroll in our health FSA now but he didn’t make an election to do so during our open enrollment for the plan year starting 1/1/2021. He told us that the IRS issued a rule that says we have to let him make an election now. He doesn’t otherwise have a life event. Do we really have to let him contribute to an FSA?
A.- If he has not experienced an IRS-approved mid-year life event recognized by the terms of your plan, you do not have to let him start contributing to a health FSA mid-year. He is correct that the IRS issued guidance allowing employers to let employees enter the plan mid-year without a life event. Employers are not required to follow this guidance- it is permitted but not required. If your plan did not adopt the open-ended mid-year election changes, you do not have to allow him to start contributing to an FSA.