11-19-2013 Organization of the Board with Oath and Regular School Board Meeting
Agenda Item #33

Proposed Change to Medical Flexible Spending Account Management


In November 1, 2013, the federal Department of Revenue and the Internal Revenue Service announced the first rule change to its medical Flexible Spending Accounts (FSA) program since the benefit’s inception nearly three decades ago.  Heretofore, participating employees faced the prospect of forfeiting any unused balances at the end of the plan year, and many employees declined to enroll because of the uncertainty in predicting eligible expenses. Under the new rule, plans may now permit participants to roll over up to $500 in unused FSA funds to the next plan year; this ability to allow rollover requires that if employers currently utilize the grace period approach, which extends reimbursements for a plan year to March 15 of the following year, then the grace period must be eliminated.  Employers may not utilize both.  More detailed information about the rule change is attached.

On November 12, the Superintendent’s Insurance Advisory Committee (SIAC) discussed this issue during its meeting, and as a result has made the following recommendations to the Superintendent and to the Board:

  1. Since the federal announcement was made so late in the 2013 plan year, the SIAC recommends that no change to the plan be made for 2013; this means that the grace period of March 15, 2014 within which 2013 funds may be used will remain in place.
  2. It is recommended that the District change its medical FSA plan to allow the rollover of up to $500 of 2014 funds into the 2015 plan year and to eliminate the grace period for 2014.
  3. Since employees recently decided about their medical FSA accounts during the 2014 Open Enrollment period, before the DOR and IRS rule change and under the current rules, it is fair and appropriate to give them another opportunity to change that decision under the new rules. Therefore, the SIAC recommends that the District open a brief enrollment window for 2014 for the specific and only purpose of allowing employees to reconsider and potentially change their medical FSA decisions. A copy of the special enrollment project plan is attached.

That the Board approve the three recommendations of the SIAC as delineated above.

Meeting Date(s)
Consent w/o Information - 11/19/2013

Authority for Action
IRS Notice 2013-71

Involves Expenditure of Funds Directly in the Classroom

Source of Funding
Agenda Item will not Require the Expenditure of Funds

Cost Center

Susan Standley, Director of Employee Benefits and Special Programs, x216

Attachment:  FSA Rule Change Discussion.pdf
Attachment:  Special FSA Enrollment Project Plan.pdf