Mistaken Elections in Cafeteria Plans

The 2024 open enrollment period is over for most employers. It’s that time of year when employees and clients ask, “Can we change an incorrect election?”

Once the plan year begins, employee elections for health and welfare benefits covered under a cafeteria plan generally cannot be changed. But inevitably, some employers must address erroneous benefit elections made by particular employees.


The IRS has provided ample correction guidance to retirement plan sponsors in their Employee Plans Compliance Resolution System (EPCRS) revenue procedure. Although there is little guidance from the IRS on correcting errors made in elections in cafeteria plans, most employers assess election mistakes and make reasonable corrections.

For erroneous elections, the IRS only allows an employer and employee to correct a mistaken election if there is “clear and convincing evidence” that a mistake has occurred.

Employer Mistakes – IRS officials have stated that clerical or administrative corrections can be made when there is clear and convincing evidence that the employer made a mistake. Examples may be wrong salary reductions, benefit elections entered into the HRIS/payroll system, or a delay in changing a salary reduction when a change in status occurs.

Example:  If the employee originally elected $1,000 and the election was entered into the system as $100, the election can be corrected if the employer has a record of the original election.

Employee Mistakes – These mistakes require more rigorous analysis because employers will not know the employee’s intention when enrolling in benefits. The following standards should be applied to determine if there has been a mistake:

Impossibility Standard:  If it’s impossible for the employee to benefit from the mistaken election, a correction is allowed.

Facts and Circumstances Standard: A correction can be made if the employer or plan administrator reasonably concludes that the employee made a mistake based on facts and circumstances surrounding the election.

Example 1: If an employee accidentally elected the Dependent Care FSA (DCFSA) instead of the Health Care FSA during enrollment, an employer should confirm that the employee does not have any eligible dependents that could be covered under the DCFSA. If there are no eligible dependents, there is clear and convincing evidence that this was a mistake that may be corrected retroactively.

Example 2: An employee enrolled in the high-deductible health plan/HSA option accidentally enrolled in the general-purpose Health Care FSA rather than the Limited-purpose FSA. The employee alerted the employer one month into the plan year. The employer may consider all the facts and circumstances such as whether the employee is contributing to the HSA. The employer may allow a correction based on the facts and circumstances.

To determine if a mistaken election can be corrected, an employer should gather the necessary information from its own records and the affected employee. Once an employer determines a legitimate mistake has occurred, the steps taken to correct the mistake should put the employee and employer back in the position as if the mistake had not occurred.

To reduce the likelihood of election mistakes surfacing after the plan year has begun, many employers provide employees with written confirmation of their elections after open enrollment and before the beginning of the new plan year. Employers often instruct employees to review their elections and notify the employer if any corrections are needed before the plan year begins. Despite this process, some employees will discover the error after the plan year begins.

Employers should carefully assess mistakes when they occur. It is important for employers to document the mistakes and corrective actions they’ve taken in their records. In addition, employers should determine if they can eliminate the likelihood of a mistake happening during their enrollment process. Taking these steps will help employers during an IRS audit.

Contact your Client Service Manager if you have any questions about this information.


TRI-AD and our Associates’ suggestions or recommendations shall not constitute legal advice. No content on our website can be construed as tax or legal advice and TRI-AD may not be considered your legal counsel or tax advisor. Clients are encouraged to consult with their tax advisor and/or attorney to determine their legal rights, responsibilities, and liabilities. This includes the interpretation of any statute or regulation, federal, state, or local; and/or its application to the clients’ business activities.