Reminder: A Change in Financial Position is Not a “Change in Status” for FSA Election Changes.

Taxpayers who have made elections to fund health FSAs offered pursuant to a cafeteria plan should remember that those elections can only be changed mid-year for very limited reasons.  A change in financial position that would reduce the taxpayer's elective medical spending is not one of the reasons for which a mid-year election change is permitted.  While certain cafeteria plan elections can be changed mid-year because of cost increases, this rule does not apply to health FSAs (and, even if they did, having reduced income to pay for medical benefits would not qualify as a cost increase under IRS rules).  For more information on the rules governing mid-year cafeteria plan election changes, visit Tax Facts Online. Read More: Link to Q3506.