Spending Accounts (HSAs, FSAs & HRAs)

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Frequently Asked Questions

Can employers extend the 2019 plan year?

No, the plan year cannot be modified, but an extended run-out can be applied to the plan to facilitate the submission of claims incurred during the plan year.

Can employers extend the FSA run-out deadline?

Yes, employers can extend the run-out deadline to their preferred length. Current guidance does not specify a maximum length for a run-out period, although it generally should end within a reasonable period after the end of a plan year. Because the IRS recently announced a 90-day extension for federal income tax filing and HSA contributions (until July 15, 2020), a similar 90-day extension of the run-out period would seem to be reasonable. No matter the extension length, however, employers must notify their employees of the change and document the change on the plan document.

Can employers extend the FSA grace period?

No, employers cannot extend the grace period under an FSA for longer than 2.5 months. The grace period can be shorter than 2.5 months but not longer.

Can an HRA plan extend the run-out period?

Yes, as with FSAs, employers can adopt a reasonable extension of the run-out period for HRAs. An extension of up to 90 days would seem to be reasonable. The plan document would have to amended if the run-out period is changed.

Is there any discussion related to adding greater flexibility to participants in making changes to annual dependent care FSA elections mid-year? As an example, many participants are no longer paying daycare fees due to closures related to COVID-19.

Dependent care FSA elections generally may be changed any time there is a change in the participant’s dependent care expenses. For example, if a participant’s daycare provider closes and the participant is no longer incurring any daycare expenses, the participant has incurred a curtailment of coverage that would permit reducing the participant’s dependent care FSA election. Based on the broad application of the cost-change events in the regulations to dependent care FSAs, plan sponsors and administrators will likely allow dependent care election changes in most circumstances that involve changes in the cost of care (e.g., fee changes, provider changes and changes in the hours of care).

Should an employer get an attestation from an employee for a change in dependent care FSA?

Yes, proof should be requested from employees for any change needed for a dependent care FSA. Ideally, this proof would include third-party documentation to support the requested change, such as a notification from a childcare provider that they are no longer providing services. However, it may be necessary to look at that on a case-by-case basis to cover any extraordinary undocumented events.

Can employers fund a dependent care FSA for more than $5,000 due to COVID-19? 

Not under current law. The limit remains $5,000 annually. However, the Employers Council on Flexible Compensation has proposed legislation to increase the amount to $10,000. We are monitoring this proposal and will keep you updated if this legislation passes.

If employees stop contributing to a dependent care FSA, how long are they allowed to submit claims?

Employees can submit claims for dependent care FSA reimbursement up until any funds in the account are exhausted, even if they have stopped contributions. Claims must be submitted during the applicable run-out period. Under most dependent care FSAs, only claims incurred while the employee was actively covered are eligible for reimbursement.

If the daycare center were to subsequently reopen, would an account be “restarted”?

Generally, yes. If a participant again begins incurring qualifying dependent care expenses, the participant would be eligible to change (increase) his or her election to contribute to the dependent care FSA, due to the increased cost incurred.

The tax filing deadline is now July 15, 2020. Does this deadline apply to HSA contributions for 2019?

Yes, the IRS recently confirmed that contributions to HSAs for the 2019 calendar year will be accepted up until July 15, 2020.

If someone makes an HSA contribution between now and the contribution deadline of July 15, can that person choose if it applies to the 2019 or 2020 max?

Yes, employees can contribute to their 2019 HSA up until July 15. They can also contribute to their 2020 HSA.