Can an employer choose not to allow mid-year changes to employees’ HSA contribution elections?

While an employer could choose to limit employees’ HSA contributions in some ways, they have to allow employees the chance to change their HSA contribution amount at least monthly.

As background, pre-tax HSA contribution election changes must be allowed at least monthly and upon a loss of HSA eligibility. This requirement correlates with the HSA monthly eligibility rules. Although an employer could choose to place other restrictions on HSA contribution elections under its cafeteria plan (such as only allowing one election change per month), the same restrictions must apply to all employees.

So the employer would essentially have to allow employees to change their HSA contribution elections on at least a monthly basis. Keep in mind, though, that many employers just allow open-ended prospective election changes to employees’ HSA contributions.

Ultimately, the circumstances under which mid-year election changes will be allowed for HSA contributions should be addressed in the cafeteria plan document and in participant communications.

Source: NFP Benefit Partners Compliance and Regulatory Frequently Asked Questions; May 29,2019

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