The State of California placed a new notice requirement on employers who sponsor flexible spending account (FSA) plans that impose a deadline to withdraw funds before the end of the plan year. The law applies to health care FSAs, dependent care FSAs and adoption expense FSAs. The new notice is intended to warn individuals if their plan requires reimbursement requests to be made before the end of the plan year.
Most FSAs are structured so active FSA participants can submit requests for reimbursements through the end of the plan year or even later, until the end of the plan’s run-out period after the plan year ends. Many plans also apply this timing to individuals who terminate employment mid-year. With that plan structure, no notice would be required under the California law.
If an employer structures its FSA to require participants who terminate employment mid-year to submit reimbursement requests within a certain period of time after termination (which is earlier than the plan year-end), the employer must notify participants of the requirement.
The notice may be provided in-person or by email, telephone, text message, or U.S. mail. Only those employers whose FSA plan design provides a mid-year termination for claims submission must comply.
A copy of the new law (which is only a few sentences), may be accessed by clicking here.
