From the Hotline: Midyear Change Rules
Question: If a health savings account (HSA) is offered under a cafeteria plan, do the midyear change rules apply?
Answer: No. According to the IRS rules, an employer-sponsored health savings account (HSA) must permit participants to change elections at least monthly, as eligibility is determined on a monthly basis, even if the HSA is provided through the cafeteria plan. A qualifying event is not needed to make such a change. However, the change must be prospective. This means changes are not made retroactively, but on a move-forward basis against salary not already earned.
Please note that we encourage employers to work closely with their tax advisors to ensure their plans are in compliance with the Internal Revenue Code.