Temporary Special Rules for Health and Dependent Care Flexible Spending Arrangements (FSAs)
1. If we adopt the temporary rules pertaining to the changes for FSA elections, when can employees make changes to their elections?
The bill authorizes plan amendments to allow election changes under a health FSA and/or a dependent care FSA (a/k/a DCAP) during the plan year ending in 2021. If the plan is a calendar year plan, that means employees could be allowed to make these election changes any time on or before December 31, 2021. If the plan is a fiscal year plan with a plan year ending, for example, on June 30, 2021, employees could be allowed to make these election changes any time on or before June 30, 2021. Keep in mind that these election changes, if made, are effective only on a prospective basis. They cannot impact contributions already made to the FSA. As a practical matter, most election changes under this new rule will be made well in advance of the last day on which the changes can be made.
2. Under the temporary rules pertaining to changes to FSA elections, is there any limitation on the frequency of changes that employees can make?
There is no specific limitation set by statute. Employers may allow unlimited health FSA and dependent care FSA election changes without a status change event OR may limit the frequency and/or circumstances under which employees may revoke and make new elections.
3. Can plan sponsors limit the number of FSA election changes (e.g., once per year without a status change)?
Yes. Nothing in the bill prevents the employer from limiting the number of FSA election changes without an intervening status change event.
4. Can plan sponsors limit the timeframe for applying for FSA election changes without a status change (e.g., set the special election change period of one month)?
Yes. Nothing in the bill prevents the employer from imposing a specific timeframe during which the special election changes must be made.
5. If we choose to allow EEs to change FSA elections mid-year with no change in status, are the election changes available only to EEs who elected the FSA for the plan year ending in 2021?
This is optional for the employer. The employer may allow both eligible employees and current participants to make election changes or may limit the ability to make these election changes only to participants.
Please be advised that any and all information, comments, analysis, and/or recommendations set forth above relative to the possible impact of COVID-19 on potential insurance coverage or other policy implications are intended solely for informational purposes and should not be relied upon as legal or medical advice. As an insurance broker, we have no authority to make coverage decisions as that ability rests solely with the issuing carrier. Therefore, all claims should be submitted to the carrier for evaluation. The positions expressed herein are opinions only and are not to be construed as any form of guarantee or warranty. Finally, given the extremely dynamic and rapidly evolving COVID-19 situation, comments above do not take into account any applicable pending or future legislation introduced with the intent to override, alter or amend current policy language.
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