HomeMy WebLinkAbout05. Review options re IRS changes to Health Flexible Spending Accounts (FSA)5
Central Contra Costa Sanitary District
January 22, 2014
TO: HUMAN RESOURCES COMMITTEE
VIA: 0, ROGER S. BAILEY, GENERAL MANAGER
(,ay'
FROM: TEJI O'MALLEY, HUMAN RESOURCES MANAGER
SUBJECT: SECTION 125 PLAN (HEALTH FLEXIBLE SPENDING ACCOUNTS)
CHANGES FOR 2014
The purpose of this memo is to provide the Board with information regarding recent
changes the Internal Revenue Service (IRS) has authorized which can be made to
Section 125 plans, specifically the Health Flexible Spending Accounts (FSA) starting in
2014.
Prior to this change, the IRS required the forfeiture of any unused balances that
remained in employees' accounts at the end of the calendar year. The IRS has now
loosened the "use- it -or- lose -it" rule and has given employers several options as to how
these plans can be structured in the future.
Currently, the District provides all employees with a Cafeteria Plan contribution per the
Memoranda of Understanding (MOU). Employees may elect several options within the
Cafeteria Plan, including the Health FSA. Employees may also elect to contribute
additional monies above and beyond what is contributed on their behalf by the District.
However, effective in 2013, the maximum that can be contributed to a Health FSA
cannot exceed $2,500 (indexed for inflation) any plan year.
The District contributions to the Cafeteria Plan are outlined below. The employees can
elect to take the contribution in cash with the exception of $50 which must be allocated
to one option within the Cafeteria Plan.
Bargaining Unit
Benefit
Management Group
$425
Management Support/Confidential Group
$220
Public Employees Union, Local #1
$100
As the monies that are not spent at the end of the calendar year are returned to the
District, the table below details the total dollar amounts of unused funds by plan year:
Plan Year
Dollar Amounts of Unused Funds
2004
$18,268.89
2005
$19,713.43
2006
$16,147.76
2007
$15,432.28
2008
$ 9,124.94
2009
$ 8,671.85
2010
$ 8,273.10
2011
$ 8,020.23
2012
1 $12,472.88
Since 2004, the participants in the Health FSA plan, on average, have lost over
$12,902.82.
At this time, the District has the following two options or may choose to make no
changes to the structure of the plan.
1. Employees may carry over up to $500 of unused monies into the following plan
year. (The plan year maximum of $2,500 would not apply to the carry over
amount)
2. Employees may be granted a "grace period" up to March 15th of the following
plan year to incur eligible expenses and shall be reimbursed in the same manner
as if the expenses were incurred during the plan year.
Per the newly released IRS regulations, the plan cannot offer BOTH the carry over and
the grace period. The regulations also allow employers to not offer either of these
options to employees.