2020 Flexible Spending Account Changes

Change Your Annual Contribution Amount

The IRS recently issued a revision that allows you to drop your Health Care FSA or Dependent Care FSA or decrease your FSA contributions for the 2020 plan year. You may only decrease your annual election once during the plan year due to this revised rule.

Due to the cancellation or delay of elective medical procedures and dental appointments, and the closure of childcare centers and summer camps in response to the COVID-19 pandemic, the IRS issued revised rules for FSAs. IRS Notice 2020-29 provides increased flexibility for FSA participants to make mid-year changes during the 2020 calendar year.

Changes in deduction amounts will be effective the first day of the month following the receipt of the form. Please note that decreases cannot be less than amounts for which you have already received reimbursement from the plan. Unfortunately, the IRS does not permit a refund of pre-tax dollars that are contributed to an FSA.

Examples

The following examples assume a January 1, 2020 Flexible Spending Account start date and a July 1, 2020 change in status effective date.

Scenario #1: You are enrolled in the Health Care FSA for an annual election of $1,000. By June 30, 2020 you have contributed $500 to your account. You have been reimbursed for $600. You would like to cancel your participation. Your new annual election as of July 1 will be $600, the amount of your reimbursement. Your monthly Health Care FSA deductions for July through December 2020 will $16.67.

Scenario #2: You are enrolled in the Health Care FSA for an annual election of $1,000. By June 30, 2020 you have contributed $500 to your account. You have been reimbursed for $300. You would like to cancel your participation. Your new annual election as of July 1 will be $500, the amount of your year-to-date deductions. You will have no Health Care FSA deductions taken from your paycheck for July through December 2020.  Please note: You may only receive reimbursements for services incurred during periods when you made contributions to your FSA. When contributions end, the PayFlex debit card is inactivated and your account is expired.

Scenario #3: You are enrolled in the Dependent Care FSA for an annual election of $5,000. By June 30, 2020 you have contributed $2,500 to your account. You would like to cancel your participation. Your new annual election as of July 1 will be $2,500, the amount of your year-to-date deductions. You will have no Dependent Care FSA deductions taken from  your paycheck July through December 2020.

How to Submit Changes to You Health Care FSA and or Dependent Care FSA

  1. Download the appropriate Flexible Spending Account Request for Change in Status form for the account you wish to change. If you have a Health Care FSA and a Dependent Care FSA and wish to change or cancel participation in both accounts, you will need to complete and send in both forms:
  1. Box 1: Enter your personal information.
  2. Box 2: The "Date of Change of Status event identified below" will be the first day of the month following receipt of the authorization form (i.e., if you are completing the form in June, the effective date will be July 1). Under "Change in Status Event," check "Other" and enter "IRS Notice 2020-29."
  3. Box 3: It is not necessary to complete this information.
  4. Box 4: Enter your current annual election and the new annual election.
  5. Box 5: Sign and date the form.
  6. Return the form by Fax to 734-763-0363, or make a copy and send the original my mail to:
        SSC Benefits Transactions
        Wolverine Tower
        3003 South State Street
        Ann Arbor, MI 48109-1276

2020 Health Care FSA Update

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, contains provisions that may help faculty and staff who are enrolled in a Health Care Flexible Spending Account (FSA), administered by PayFlex.

These provisions are included in the CARES Act:

  • The law allows faculty and staff to use Health Care FSA funds to purchase OTC drugs and medicines without a prescription from a physician.

  • The law also adds feminine hygiene products, including tampons, pads, liners, cups, sponges, or similar products, to the list of over-the-counter items eligible for reimbursement from a Health Care FSA.

These OTC changes are effective for expenses incurred after December 31, 2019.