Q&A: Benefits Changes After Giving Birth to Stay Compliant

Question:

We have an employee who recently gave birth to twins. Although she is enrolling them in her husband’s health plan instead of ours, she has asked to make the following changes to her own benefits elections:

1. Move from the HSA-eligible high-deductible health plan (HDHP) to our lowest deductible PPO plan.
2. Discontinue her HSA contributions for the remainder of the year.
3. Start contributing to the Health Flexible Spending Account (FSA).

Should we allow her to make any or all of these changes? My concern is that changing her own benefits elections while not enrolling the baby in our plan would violate the cafeteria plan consistency requirements for election changes under IRS rules.

Answer:

When an employee gives birth, her ability to change her benefits elections must be analyzed under both the IRS’s cafeteria plan regulations and HIPAA’s special enrollment rules. (For related discussions, see our Questions of the Month from November 2023 and June 2025.)

Your three questions must be analyzed separately as follows: 

1. When an employee has a child, HIPAA entitles her to elect group health coverage beyond what the cafeteria plan rules allow. Your employee is entitled to a HIPAA special enrollment period, and there is no consistency requirement under HIPAA. That means the employee could enroll herself in your health plan even while enrolling her babies in the husband’s plan. However, the employee’s ability to change from one plan to another is less clear. We recommend asking your carrier or TPA what they will allow.
2. HSA contributions are not subject to the regular cafeteria plan rules for mid-year election changes. If the HSA is included in your cafeteria plan, you should allow such changes at least monthly, regardless of whether a change in status has occurred. This includes if the employee stays on the HDHP.
3. Cafeteria plan regulations allow employees to start or increase a health FSA election due to birth/adoption. (HIPAA special enrollment doesn’t apply to Health FSAs). Even if the twins are enrolled on the spouse’s medical plan, starting or increasing a health FSA election should be allowed because it is consistent with the addition of a dependent.

Not a client of The Miller Group? Connect with one of our employee benefits advisors to learn how our compliance team can help you stay on track and confidently meet your obligations.