Before you decide to add rollovers to your plan
Frequently Asked Questions for employers
What forms have to be completed to add the Health Care FSA rollover?
Employers can use the BESTflex Health Care FSA Rollover Amendment Form. It is a simple form that allows the employer to remove the 2 ½ month grace period (if one is in place) and add the rollover feature. Please note that the effective date is the start date of the plan year to which the rollover will be added, not the start of the plan year that the dollars will rollover into.
For example, if you apply the rollover to the 2013 plan year, the funds remaining in the 2013 plan year, up to $500 would be able to be used for 2014 expenses in the 2014 plan year. For this, the effective date on the Amendment Form should be 01/01/2013.
If you apply the rollover to the 2014 plan year, the funds remaining in the 2014 plan year, up to $500 would be able to be used for 2015 expenses in the 2015 plan year. For this, the effective date on the Amendment Form should be 01/01/2014.
Does Employee Benefits Corporation provide updated documents to support the rollover feature?
Yes. Our Plan Document, My Company Plan, Summary Plan Description, certain reports and other necessary forms have been updated.
Will Employee Benefits Corporation charge a fee for the amendment to add the rollover option?
If you add rollover when you renew your plan, there are no additional fees. If you choose to change your plan mid-year, standard change amendment fees apply. Please refer to your BESTflex Plan Service Agreement for more information.
Will a monthly fee be charged for participants who don't make a new election but whose dollars roll over to a future plan year?
Yes. Once the funds are rolled over, a participant's entire plan year is activated. We cannot prorate administration fees for only the months an account has a balance.p>
Health Savings Accounts
Do the rollover dollars impact the ability to contribute to a Health Savings Account?
Yes. Similar to the rules governing grace period, the availability of rollover funds in the new plan year will disqualify a participant or an employer from contributing dollars to a Health Savings Account like SimplyHSA. Since the rollover is not based on a participant election, but on a plan design option, the participant may be excluded from contributing to the HSA for an entire year because they did not use up all of their funds.
The rollover does not occur until after the runout period is over. Therefore, if an individual had money remaining on the last day of the previous plan year, but used it all of those funds solely for prior year's expenses during the runout period, then that individual would be eligible on the first day of the month following the end of the runout period to make HSA contributions.
If, however, they used any of the rollover money for current year's expenses during the runout period, they would be ineligible to make or receive HSA contributions for the entire duration of the new plan year.
If an individual elects a Limited Purpose Health Care FSA for the new plan year, the previous year's rollover balance will be applied to the Limited Purpose Health Care FSA. In this scenario, the individual would be eligible on the first day of the new plan year to make HSA contributions.
The following plan design options also seem to be permissible under the current regulations to allow individuals to be HSA eligible on the first day of the new plan year. Currently, these options are not available for BESTflex plans through Employee Benefits Corporation. However we will look to see what kind of requests we will get in the future to provide either or both of these options. Both of these options would require a plan document amendment to allow for the change and notification of the change to individuals enrolled in the Health Care FSA.
Option 1: The employer could allow individuals to waive their rollover prior to the beginning of the new plan year to make sure that the employee is immediately eligible to make HSA contributions in the following plan year.
Option 2: The employer could also amend their plan so that if an individual elects the high deductible HSA compatible plan, then the individuals' Health Care FSA funds would automatically roll into a Limited Purpose Health Care FSA in order for the individual to be eligible on the first day of the new plan year to make HSA contributions.
Pros and Cons
Are there pros and cons to offering rollover verses grace period?
Yes. Each employer will have to carefully weigh this decision. Some of the issues to consider include:
Participants and employers can be disqualified from making HSA contributions (while grace period disqualifies contributions for 3 months, rollover can disqualify contributions for at least through the plan year or longer)
Even if participants do not re-enroll in the new plan year, those with rollover funds available are automatically set up with a new account; as a result, monthly service fees for those participants will apply
Participants that planned for a large expense during the grace period (the first 2 ½ months of the new plan year) could be impacted if rollover is adopted, since only $500 can be used in the future year. Employers should use caution if an employee was planning to use money during the grace period for large ticket items such as Lasik eye surgery, orthodontia payments, etc. In some cases, it may be better to wait until the following year to allow participants to plan.