Under the general rules of Flexible Spending Accounts (FSA), certain changes that occur in an employee’s situation are considered “Change in Status” events which allow participants to increase or decrease contributions, or enroll or dis-enroll from a FSA. The following are some situations that may occur as a result of the response to the pandemic, and whether these trigger a Change in Status:
Dependent Care FSA Examples
- Scenario A: Daycare closes causing a loss of care and a loss of care expenses. This is a significant reduction or elimination in cost of care.
- This loss in care expenses would allow for an employee to decrease their election or stop participating in the plan.
- Scenario B: Employee is now working from home and can keep children home instead of going to daycare. This is a significant reduction or elimination in cost of care.
- This loss in care expenses would allow for an employee to decrease their election or stop participating in the plan.
- Scenario C: School closes and employee needs to enroll their child in daycare to allow the employee to continue to work. This is a new expense that was not previously present.
- This new care expense would allow for an employee to enroll or increase their current election.
Keep in mind, with scenarios A and B, if the employee opts to cease participating in the plan, the time period for reimbursable expenses would be limited from 1/1 (or plan start date) through the date the status change is declared. If an employee stops participation today and forgets to re-elect upon return to work, the participant is limited in the use of the funds contributed from 1/1-3/30. The recommendation would be for employees to reduce their contribution to whatever they have contributed year-to-date. This would allow employees to use contributed funds for the duration of the plan year with no break in coverage.
Return to Regular Operations
A new status change would be triggered when the usual day-to-day operations resume. When the schools reopen and paid daycare is no longer required, the change in/loss of care expenses would allow an employee to reduce their election or cease participating in the plan.
For employees whose daycare providers reopen and their dependents can return, this creates an increase in cost of care. This would allow employees to increase their election or re-enroll.
For more details about mid-year changes for DepCare FSA, please review the SPD at UCnet: https://ucnet.universityofcalifornia.edu/forms/pdf/depcare-fsa.pdf
Health FSA Example
- Scenario A: Spouse loses a job due to the pandemic. The termination results in loss of eligibility under own employer’s plan.
- This loss of eligibility under their employer’s plan would allow an employee to enroll or increase election if spouse/dependent loses eligibility for health coverage.
See https://ucnet.universityofcalifornia.edu/forms/pdf/hfsa.pdf for more information about when mid-year changes to the Health FSA are allowed.