Q.- Our FSA currently runs on a calendar year. Our Medical Plan renews July 1. We want to change the FSA plan year to sync with the Medical Plan. May we do this?
A.- Probably yes, but there are several issues to consider. A Plan Year may be changed only for a legitimate business purpose. Syncing the two plans may be considered a legitimate business purpose, but you will want to review all of the factors at play to make sure. You will also want to consider how the change will be communicated to employees, and what will happen with any plan contribution limitations. You should give participants as much advance notice of the change as possible so they can properly spend down their FSA balance. Communicating the change in advance of the short plan year is preferable.
