Find answers to common questions regarding FSA during our Coronavirus crisis.

Can employers extend the FSA runout deadline due to COVID-19?

Yes, it is permissible for employers to extend the deadline for submission of claim documentation. There is no legal rule regarding the length of the runout period for an FSA. A runout period of 90 days or three months is standard, but nothing prohibits plan sponsors from allowing a longer runout period. The only specific requirement is that the participant must have incurred the expense during the plan year. If that is satisfied, the regulations say that “actual reimbursement of covered medical care expenses may be made after the applicable period of coverage.” If you do decide to extend the runout period, ensure you do so uniformly. Contact Sterling for help with this.

If we decide to uniformly extend the FSA submission deadline, what is required to make that happen?

Because a cafeteria plan document specifies the runout period length, the Code typically requires plan sponsors to amend the plan document to reflect any changes to that timeline. However, given the unique circumstances of COVID-19, it may not be necessary to execute a formal amendment to the plan document. Instead, it would be sufficient to modify the relevant plan terms and communicate the modification to your employees. This communication could be as simple as preparing an email or memo to covered individuals describing the updated provision. Contact Sterling for help communicating any such changes to your employees.

Can Dependent Care FSA participants who have lost preschool and childcare services due to facility closures reduce their DCA elections or terminate altogether?

Yes. Participants can reduce or terminate their dependent care account elections under these circumstances, as their childcare needs have changed. However, we advise account holders to keep in mind that they may not need to change or revoke their plan elections, even if they are not incurring any new dependent care expenses. Account holders may be able to claim their full plan year elections once the shelter-in-place orders cease, as childcare expenses can often reach the $5,000 annual contribution limit within 2-5 months. Contact Sterling if you have any questions regarding dependent care account election modifications.

What Has Changed Regarding Over-the-Counter (OTC) Drugs and Menstrual Care Products

The CARES Act states that consumers can purchase OTC drugs and medicines with funds from their health savings account (HSA), flexible spending accounts (FSA) or health reimbursement arrangement (HRA). Consumers may also receive reimbursement for OTC purchases through those accounts. In addition, menstrual products are now considered a qualified medical expense, meaning consumers can pay for or be reimbursed for these products through an HSA, FSA or HRA. This provision is effective for purchases made after December 31, 2019, and for reimbursements of expenses incurred after December 31, 2019. It does not have an expiration date.