• COVID-19 Relief Bill Information

    January 7, 2021

    As you may know, the newest COVID Relief Bill (RB), formally known as the Consolidated Appropriations Act, 2021, was signed into law. The bill includes temporary relief by expanding the opportunities Health FSA and DCAP (dependent care) plan members have to benefit under an FSA plan.

    What next?

    The provisions allowed under the COVID relief bill are not mandatory and for your employees to take advantage of the provisions, your plan documents must be amended. For this reason, we need your decision in determining which, if any, of the provisions you would like to adopt.

    Please review the provisions below, check-mark the box next to the provision(s) you wish to implement, and return a copy of this page of the letter with your selection(s) to psasales@pacificsource.com or via fax to: 800.575.1109.  A full explanation of each of the provisions and additional key aspects are outlined at the end of this document. If we do not receive a response to this letter by February 28, 2021, PacificSource Administrators will default your plan as Opt-out to all provisions allowed under the COVID relief bill. We would prefer you respond so your decision is clear. 

    ☐  OPT-OUT: Continue Current Plan Design – No plan changes needed.

    ☐   RB-Carryover Provision: Expansion of Carryover from 2020 and 2021 Plan Years.

    Employers may choose to amend their FSA to allow unused Health FSA and DCAP contributions remaining at the end of a plan year ending in 2020 and 2021 to be carried over to the next plan year. **If you choose this provision, RB-Grace Period Provision below is not available.

    ☐   RB-Grace Period Provision: Extension of Grace Period for 2020 and 2021 Plan Years.

    Employers may choose to amend their FSA to allow an extended 12 months grace period after the end of the plan year ending in 2020 or 2021. **If you choose this provision, RB-Carryover Provision above is not available.

    ☐  RB-Post Term Provision: Post Termination Reimbursements from Health FSA.

    Employers may choose to amend their FSA to allow employees who ceased to participate in the Health FSA during the calendar year 2020 or 2021 to continue to receive reimbursement from unused benefits or contributions through the end of the plan year that the employee ceased to participate (including grace period).

    ☐   RB-DCAP Aged-out Provision: Carry Forward Rule for DCAP and Aged-out Dependent(s).

    Employers may choose to amend the DCAP Component under their FSA to temporarily extend the maximum age for eligible dependents up to the age 13. This allows Participants enrolled in DCAP who had a child that turned age 13 in the 2020 plan year (more specifically, in the plan year for which the open enrollment period ended on or before 1/31/2020) to be reimbursed for eligible dependent care expenses incurred after the child’s 13th birthday for the remainder of that plan year, or if there is an unused balance at plan year end, in the following year until the child turns age 14.

    ☐   RB-Mid Year Change Provision: Extension of Change in Election Amount.  

    Employers may choose to amend their FSA to allow prospective mid-year election changes to the Health FSA and DCAP components without a qualifying change event if their plan year ends during the 2021 calendar year.

    Should you have questions, please contact your assigned Client Service Representative.

    Thank You,

    Client Service Department

    PacificSource Administrators

     

    Provision Overview

     

    • RB-Carryover Provision: Expansion of Carryover from 2020 and 2021 Plan Years.

    **If you choose this provision, RB-Grace Period Provision below is not available.

    Explanation: Employers may choose to amend their FSA to allow unused Health FSA and DCAP contributions remaining at the end of a plan year ending in 2020 and 2021 to be carried over to the next plan year.

    Key Reminders to allowing this provision: The normal $550 Health FSA carryover cap does not apply. However, the existing plan carryover condition rules will still apply – see your FSA Summary Plan Description for details. Per PacificSource Administrators policy and ease of administration, if the plan is amended to allow the expansion of carryover, it will automatically be applied to both the 2020 and 2021 plan year as well as both the Health FSA and DCAP components, unless otherwise told. Normal monthly admin fees will be charged for members who have an account activated once the carryover has been processed.

    Example: An employee has $600 in unused Health FSA and $1,500 in unused DCAP contributions remaining at the end of their plan year, 12/31/2020. Because their employer amended to allow the “Expansion of Carryover from 2020 and 2021 Plan Years” the unused contributions may be carried over to the 2021 plan year. In addition, if the same employee ends up having unused amounts at the end of the next plan year, 12/31/2021, the unused contributions can again be carried over to the 2022 plan year.

    • RB-Grace Period Provision: Extension of Grace Period for 2020 and 2021 Plan Years.

    **If you choose this provision, RB-Carryover Provision above is not available.

    Explanation: Employers may choose to amend their FSA to allow an extended 12 months grace period after the end of the plan year ending in 2020 or 2021.

    Key Reminders to allowing this provision: The extended grace period would replace any existing grace period already in place; it is not added on to an existing grace period. Per PacificSource Administrator policy and ease of administration, an employer who offers both Health FSA and DCAP must allow the “Extension of Grace Period for 2020 and 2021 Plan Years” on both components under their FSA. In addition, the extension of grace period will automatically be applied to both the 2020 and 2021 plan year, unless otherwise told.  Normal monthly admin fees may apply – contact your Client Service Representative for further details.

    Example: An employer amends their 1/1/2020-12/31/2020 FSA to allow the “Extension of Grace Period for 2020 and 2021 Plan Years”. For this reason, employees enrolled in the 1/1/2020-12/31/2020 plan year may be reimbursed for eligible expenses incurred through 12/31/2021 from any unused contributions remaining as of plan year end 12/31/2020.

    • RB-Post Term Provision: Post Termination Reimbursements from Health FSA.

    Explanation: Employers may choose to amend their FSA to allow employees who ceased to participate in the Health FSA during the calendar year 2020 or 2021 (not plan year) to continue to receive reimbursement from unused benefits or contributions through the end of the plan year that the employee ceased to participate (including grace period).

    Key Reminders to allowing this provision: The standard Uniform Coverage Rules do not apply to the Health FSA if this provision is selected; reimbursement will be limited to contributions received. Per PacificSource Administrators policy and ease of administration, if the plan is amended to allow “Post Termination Reimbursement from Health FSA”, it will automatically be applied to both the 2020 and 2021 calendar year, unless otherwise told. Normal monthly admin fees will be charged for members who have an account.

    Example: An employee enrolled in their employer’s 2/1/2020-1/31/2021 Health FSA for $2,000 loses eligibility 6/30/2020 at which time the employee has contributed $1,000. Because the employer amended to allow “Post Termination Reimbursements from Health FSA”, the employee may be reimbursed for services incurred through 1/31/2021 up to the $1,000 in contribution as of the employee’s loss of eligibility date.

    • RB-DCAP Age-out Provision: Carry Forward Rule for DCAP and Aged-out Dependent(s).

    Explanation: Employers may choose to amend the DCAP Component under their FSA to temporarily extend the maximum age for eligible dependents up to the age 13. This allows Participants enrolled in DCAP who had a child that turned age 13 in the 2020 plan year (more specifically, in the plan year for which the open enrollment period ended on or before 1/31/2020) to be reimbursed for eligible dependent care expenses incurred after the child’s 13th birthday for the remainder of that plan year, or if there is an unused balance at plan year end, in the following year until the child turns age 14.

    Key Reminders to allowing this provision: Per PacificSource Administrators policy and ease of administration, if the plan is amended to allow “Special Carry Forward Rule for DCAP and Aged-out Dependent(s)”, it will automatically be applied to the following plan year, unless otherwise told.  Normal monthly admin fees will be charged for members who have an account.

    Example: An employer’s FSA year runs 2/1/2020-1/31/2021 and their open enrollment period occurred on or before 1/31/2020. The employer may amend their FSA to allow the “Special Carry Forward Rule for DCAP and Aged-out Dependent(s)”, which would allow reimbursement of eligible DCAP expense for dependents up to the age of 13. In addition, unused contributions can be carried over from to the 2/1/2020 -1/31/2021 plan year and continue to reimburse eligible DCAP expenses until the child turns 14.

    • RB-Mid Year Change Provision: Extension of Change in Election Amount.  

    Explanation: Employers may choose to amend their FSA to allow prospective mid-year election changes to the Health FSA and DCAP components without a qualifying change event if their plan year ends during the 2021 calendar year. This would include allowing new elections for those that opted out during open enrollment as well as increase/decreases to existing Health FSA and/or DCAP elections.

    Key Reminders to allowing this provision: Standard dollar limitations (IRS or plan design) and prorating rules in place will apply – see your FSA Summary Plan Description for further details. Per PacificSource Administrators policy and ease of administration, if the plan is amended to allow the “Extension of Change in Election Amount”, it is automatically applicable to all change types, unless otherwise told.

    Example: During the FSA year 6/1/2020-5/31/2021, a participant who enrolled in the Health FSA for a $1,200 annual election incurs an unexpected medical expense, depleting the entire $1,200. Because their employer amended their FSA to allow the “Extension of Change in Election Amount” for the 6/1/2020-5/31/2021 plan year, the participant can choose to increase their election without a qualifying election change event.

    What does this mean to you?

    • PSA-TPA will continue to review claims activity on a weekly basis and will automatically reprocess claims that were denied prior to opting into one or more of the indicated provisions without any additional action required by participants.
    • Depending on the provision(s) you choose to implement, Year End Balancing may be further delayed.  This is because we are unable to complete final reconciliations of accounts until all eligible claims have been filed and processed.
    • Year End Reminder Letters will continue to encourage participants to submit their claims within the normal 90 days to ensure they received their maximum benefit in a timely manner and to avoid any complications that may occur from additional changes to the regulations.
    • The COVID relief bill did not change how Health FSAs interact with Health Savings Account (HSA) eligibility. Please contact your Client Service Representative to discuss how implementing one or more of these provisions may impact an employee’s eligibility for an HSA in either 2021 or 2022.
    • To avoid processing issues, please return a copy of the first page of this letter with your selected provision(s) as soon as possible.
    • Your plan document Amendment, as well as a Summary of Material Modification (SMM) for your employees, will be provided to you within 30 days of the receipt of this returned letter.

     

    Please note that the COVID relief bill encompasses multiple provisions and although we want you to be aware of those provisions and what they may mean to your plan, additional IRS guidance would be welcomed and should be expected. In addition, PacificSource Administrators cannot provide you with legal or tax advice regarding this bill or the requirements for the provisions.