Q.- An employee just told us he elected to participate in the dependent care FSA but actually meant to participate in the health care FSA. He does have a disabled child. He wants to switch his contributions to the health FSA. Can we allow him to do that?
A.- Generally, health FSA funds and dependent day care FSA funds should not be transferred between accounts. The IRS has commented that in very limited circumstances, an FSA election may be adjusted if there is a “clear and convincing evidence” that a mistake has been made. For example, if an employee does not have dependents but enrolls in the DFSA, that could be “clear and convincing evidence” of a mistake. In the situation described above, you should ask for more information to determine if a mistake was actually made. Does the employee really not have any need for dependent care or is the employee trying to get money into a health FSA for an upcoming medical expense? You should get evidence of an actual election mistake.
