Typically, according to the CRA, changes to Health Spending Account contributions are only allowable on renewal of the Plan or mid-Plan Year (AKA: outside of the renewal period) if reasonably justified by life change events such as changes in number of dependants, changes in spousal coverage, or changes in job status.
Why? To protect Members and Plans from negative tax implications.
So unless there’s a life change event to reasonably justify changes to contributions, then changes aren't allowable until the Plan renewal date.
There's also a couple exceptions to the general rule... we may be able to decrease (but not increase!) contributions outside of the renewal period, and without a justifiable life change event if:
- The Members on the Plan sign a form acknowledging changes to their employment agreement and benefit agreement. AKA: we need the documentation to ensure employees are protected!
- It's an individual Plan (only one Member on the Plan and he/she is giving the instructions), we’d be able to decrease the contributions on the basis that the Member is acknowledging changes to their employment agreement them self.
However, an employee leaving or joining the company is definitely considered a change in job status/life change event! So, activating and deactivating employees from a Plan when their employment status changes is absolutely justifiable for mid-Plan year changes.
Check out our article How do I add or remove Members on my Plan? for all the details and how tos on how to add/remove Members!
Questions? Say firstname.lastname@example.org!
Coming soon is a blog about cancelling Plans and changing contributions... keep an eye out for it!