July 13, 2021: This article has been updated to note the end of the FSA blackout period.
Many of our plans have been upended due to the COVID-19 pandemic — including plans for routine doctor and dentist visits, child care and our kids’ favorite summer camp. With all of this disruption, your Health and Dependent Care Flexible Spending Account contributions may not have matched your expenses.
Fortunately, the 2021 Consolidated Appropriations Act and the American Rescue Plan Act have made it possible for UC to provide relief. UC has approved some important temporary changes to allow employees:
- More time to use FSA contributions for 2020 or 2021
- The opportunity (through Oct. 29, 2021) to enroll in an FSA or make changes to 2021 elections
- An increase in the DepCare FSA annual maximum (to $10,500) and the flexibility to use 2020 funds for a child who turns 13 during 2020 or 2021
Because FSAs are governed by IRS rules, some of these changes are complicated. Please see below, and FAQs about changes to UC benefits programs for pandemic relief, for details.
Health FSA: Carry-over of full remaining balance
Provided the account has a balance of at least $25, the full remaining balance of unused Health FSA funds in a participants’ account will be carried over from the 2020 plan year to the 2021 plan year — not limited to $550 as announced last year. This may include amounts carried forward from the 2019 plan year that went unused in 2020.
Given continuing uncertainty, the full remaining balance of unused Health FSA funds in a participants’ account will also be carried over from the 2021 plan year to the 2022 plan year.
The carry-over from plan year 2022 to plan year 2023 will once again be limited to $550.
A few important notes
- The amount carried forward does not decrease the maximum amount you’re allowed to contribute for the year. However, some questions remain about how this change may impact taxable income. As we await IRS guidance, plan participants are advised to consult a tax professional.
- Individuals cannot participate in a Health Savings Account (HSA) if they have FSA funds carried over from the prior year. If you are enrolled in the UC Health Savings Plan in 2021, you are not eligible for the FSA carryover — that is, UC has to forfeit your remaining funds — in order for you to remain eligible for your HSA.
Dependent Care FSA
Grace period extension
The grace period to use 2020 DepCare FSA funds will be extended through Dec. 31, 2021. This means you can use the money you contributed during 2020 for eligible expenses you incur in 2020 and in 2021. You’ll have until Jan. 31, 2022, to submit claims for those expenses.
Similarly, the grace period to use 2021 DepCare FSA funds will be extended through Dec. 31, 2022. So, you can use the money you contribute during 2021 to pay for eligible expenses you incur in 2021 and in 2022. Your claims must be submitted by Jan. 31, 2023.
Increase in annual contribution maximum
the 2021 DepCare FSA annual maximum has increased to $10,500; participants may now increase their contributions up to that amount in UCPath if they choose.
Increase in maximum age of eligible dependents
Under usual DepCare FSA rules, a child’s expenses are eligible up to the age of 13. As part of this relief package, a child’s expenses will be eligible up to age 14. In order to qualify, you must have been enrolled in DepCare in 2020 and have a dependent child who turns 13 during 2020 or 2021.
This change only applies to unused funds from the 2020 plan year. This means that claims incurred in 2020 and 2021 for children 13 years old and younger may be reimbursed from funds contributed in 2020. Funds contributed in 2021 may only be used to reimburse claims for children 12 years old and younger.
Changing your Health FSA and DepCare FSA elections
Just like last year, eligible employees will be allowed to make the following prospective changes to their 2021 plan year elections Health and DepCare plans without a qualifying life event:
- Cancel their 2021 participation
- Make a new election for 2021
- Change their 2021 election
Rules for election changes
- Individuals may make up to two election changes per FSA plan during the 2021 plan year (up to two changes to the Health FSA and up to two changes to the DepCare FSA).
- IRS rules continue to prohibit refunds of employee contributions. If an employee elects to decrease the annual election amount, the new election cannot be lower than:
- The amounts deducted year-to-date
- The amount already reimbursed for claims in 2021
- If an employee cancels participation in the FSA, they may not file claims for services incurred after the cancellation. If you would like to stop contributions for the remainder of the year but continue to incur eligible expenses, you can instead reduce your annual election to the amount you’ve already contributed.
How to make changes
If you are eligible, you may begin requesting changes as of March 15, 2021. To request a change, follow the steps below:
- Log in to UCPath online
- From the home page, select Ask UCPath Center
- On the menu bar, select My Inquiries or Submit an Inquiry.
- From the inquiry page select or type:
- Topic: Select “Benefits”
- Category: Select “Benefits Election Inquiry”
- Subject: Type “Request COVID-19 FSA Event”
- Description: Type “Change election for Health FSA and/or DepCare FSA”
You will receive an email notifying you when the event has been opened and you can log in to UCPath to make your desired changes.
Once the event is opened, you will have 31 days to log into the UCPath portal and make your desired changes. The event will close automatically after 31 days if you don’t take action.
After you’ve changed your election(s), you’ll receive a confirmation statement from UCPath.
The change will be effective at the beginning of the month following when UCPath opened the “change event” for you. For example, for a monthly-paid employee, if an election is changed on March 16, the change is effective April 1 and the new deduction will appear on the April 30 paycheck.
The last date to make changes for the 2021 plan year is October 29, 2021.
FSA “blackout period” for 2020 DepCare claims
Because of the work involved in these changes, there was a “blackout period” when our FSA administrators were unable to process claims or issue reimbursements for DepCare expenses incurred in 2020. This blackout period will began April 16, 2021, and ended July 2021.
Customer service teams continued to serve participants as usual, but 2020 claims submitted during this period may have been denied in error. Claims for expenses incurred in 2021, including debit card purchases, continued to be processed during this time.
The deadline for submitting Health FSA claims for expenses incurred in 2020 was April 15, 2021, prior to the blackout. Please note that this deadline was not extended to the new IRS income tax filing deadline of May 17, 2021.