The New Year is here! That means calendar-year cafeteria plans are in their new plan year. Many employers are mindful that their employees may want to change or revoke their Flexible Spending Account (FSA) elections, but fear that it might be too late.
Typically, with a plan year that began on or renewed on January 1st, any and all elections would have to of been made no later than December 31st of the previous year. This is pretty standard even if the employer has not yet run its first payroll of the new plan year.
Once a new plan year has begun, cafeteria plan elections are irrevocable and can only be changed under the following circumstances:
- If a “permitted election” event occurs (marriage/divorce, birth of a child, change in employment status that impacts eligibility, etc.)
- To correct an “impossible election” mistake
- To pass non-discrimination testing
- If a participant fails medical underwriting and is denied coverage under the plan
If employers allow employees to make changes to their cafeteria plan elections outside of these parameters it could result in hefty tax penalties, fines, and even disqualification of the plan. To ensure you and your employees remain compliant chat with one of BASIC’s FSA team members today and click here to request a proposal.