|Reminder and Recommendations on the $500 FSA Rollover:
On October 31, 2013, the US Treasury Department modified its FSA “use-it-or-lose-it” provision to allow rollover of FSA funds up to $500 into the following year’s plan. The Employers Council on Flexible Compensation summarizes the benefits here. Adopting this provision is optional for employers, but to take advantage of it, employers must amend their plans and communicate the changes to their employees.
Recent surveys of plans with July 1 Plan Years adopting the Rollover Provision show increases from 7-11% in both the number of participants and annual contributions. It is important for employers to make a decision and communicate it to employees before open enrollment begins. Employers not adopting the Rollover may want to outline the reasons and explain them to benefits staff so that they answer questions consistently.
Like with many administrative issues, further IRS guidance would be helpful. However, since IRS Code 125 was created by the Tax Reform Act of 1978 and we are still awaiting final regulations, we are not optimistic that guidance will be soon forthcoming. We suggest proceeding conservatively and making adjustments (plan amendments) if and when additional guidance is issued.
We are making the following suggestions based upon limited guidance issued to date, “informal guidance” from IRS officials, and consensus of our industry peers.
Take advantage of the new rule to increase your enrollment for next year!
What Voluntary Health Plans are and are not Subject to COBRA?
- Health Reimbursement Arrangements (HRA)
- Health Flexible Spending Accounts (FSA)
- Health Insurance Plans, HMO’s and self-funded plans
- Prescription Drugs
- Hearing care
- Drug and Alcohol treatment
- Wellness programs
- Disease specific policies that provide medical
treatments (i.e. cancer)
Are NOT Subject:
- Health Savings Accounts (HSA)
- Accidental Death and Dismemberment Plans
- Group Term Life Insurance Plans
- Long-Term Care Plans
- Long and Short-Term Disability plans assuming they do
not provide Medical Care
Start thinking about 2015 Plan Years Now!
- Advance Notice - giving your employees a simple email reminder
and placing posters in common areas will alert your employees
that open enrollment time is coming and will get them thinking
about this topic.
- Start Early - most plans renew January 1st but waiting until
December for open enrollment meetings may be too little time for
your employees during the busy Holiday Season. Hold meetings in
October or November to give employees ample time to review their
options and make informed decisions.
- Communication - use a variety of communication modes (videos,
virtual and live meetings and printed materials) to serve to
provide multiple touch points for your employees to grasp their
- Involve Spouses and Offer One-on-One-Time - allowing your
employees the option to invite their spouses to join the meeting
and providing an opportunity for employers and their spouses to
schedule a time to ask follow-up questions is valuable and will
ensure that decisions are made on time