On October 31, the Department of Treasury (DOT) announced a major policy change that will impact Flexible Spending Accounts (FSAs). Specifically, the DOT has modified its Medical FSA “Use It or Lose It” provision to allow a carryover of FSA funds (up to $500) from one Plan Year to the next.
Beginning on your next new FlexSystem medical FSA Plan Year, Carryover will be added automatically. TASC believes the Carryover option is best for employers who wish to increase FSA participation and annual election amounts of eligible employees. (If you prefer a Grace Period instead—or neither a Grace Period nor Carryover, you must opt out of the Carryover feature. This opt-out election will be presented prior to your Plan renewal.)
For your current Plan Year (in progress), your Participants may continue to incur eligible expenses and submit requests for reimbursement through their Grace Period (if elected) and may submit requests for reimbursement during the Runout Period for eligible expenses incurred in the previous Plan Year.
Introduced years ago, the Grace Period and Runout Period aim to lessen Participant risk of losing money when investing in an FSA. These “extensions” have proven to foster a positive Participant experience year after year. At TASC, most Clients find the Grace Period and/or Runout Period provide ample time for Participants to submit final reimbursement requests and expend their elected funds, thereby reducing or entirely eliminating the forfeiture of unused funds at the end of the Plan Year. Therefore, we believe Participants in a current Plan are well-protected from losing their hard earned money.
TASC is working to update our operational systems and administrative processes to accommodate the Carryover. You can look forward to a robust system with new features in 2014. This enhanced system within MyTASC will provide flexible Plan management options per benefit along with an auto notification tool to keep Participants informed of important deadlines specific to their elected accounts. We are confident you will be pleased with the enhanced system and will appreciate its many innovations that boost control and convenience for you and your Participants alike.
However, if preferred, you may elect the Carryover to be effective with this current Plan Year. Those who elect the Carryover may not elect the Grace Period for their medical benefit; it’s one or the other, per DOT policy. Furthermore, if you elect the Carryover, the Grace Period option will be eliminated for all of your FSA benefits (i.e. medical and dependent care) Plans in progress. We are working on updates to our operational processes and systems to accommodate the Carryover. Because these system improvements will take time, a temporary manual system will implement Carryover for soon-to-end Plans.
Prompt action is required if you want Carryover for the current Plan Year. To amend the current Plan Year to elect Carryover (and remove Grace Period, if applicable): (a) submit an electronic election form prior to the new Plan start date (we will send separately) and (b) communicate to your employees regarding the change. (Clients with a December 1, 2013 Plan start date must complete the election form within two weeks to get Carryover for a current Plan; an election form will be sent this week.)
If you have questions or concerns regarding the new Carryover policy, please contact Customer Care via a MyService Request (from MyTASC, click Contact Us) or call 1-800-422-4661. We’re always happy to help!
