Communicating the Adoption of a Health FSA Carryover

In addition to the required Summary Material Modification (SMM), you may use our sample message to communicate the adoption of a carryover provision to your employees. Simply add the details in the form fields and select the paragraphs that relate to your plan. We strongly encourage you to include this message in your open enrollment materials or post it to your intranet or other employee portal.

Sample Participant Communication for Benefits Package with an HSA

Here’s some great news about your CONEXIS health flexible spending account (FSA)! The Treasury Department and the Internal Revenue Service (IRS) have modified the “use-it-or-lose-it” rule. Instead of risk losing the funds left in your health FSA at the end of the coverage period, you may now carry over up to $[500 or lesser max limit] of your remaining health FSA funds into the next plan year.

If you have not enrolled in an FSA before, now is the time to consider having this account![Organization Name] has amended our FSA plan to include the carryover provision, which applies to the [20xx] plan year. This means you do not have to rush to spend all of your health FSA funds or worry about losing money when the plan year ends. This change gives you even more control over your health care dollars from year to year.

[Use this paragraph if your plan now has a grace period in the past and carryover is being adopted immediately]

When the IRS introduced the carryover provision, the regulations stated that a health FSA cannot have both the carryover feature and a grace period. We chose to include the carryover feature in our plan to reduce your risk of forfeiting your hard-earned money. Please be aware your health FSA no longer has a grace period, and you may only carry over $[500 or lesser max limit] when the [20xx] plan year begins on [Month xx, 20xx].

[Use this paragraph if your plan has a grace period and carryover is being adopted on a prospective basis]

When the IRS introduced the carryover provision, the regulations stated that a health FSA cannot have both the carryover feature and a grace period. As this plan year ends, you can continue to use the funds remaining in your health FSA during the grace period. The carryover feature applies to the following plan year.

Please note: This change does not affect the dependent care FSA plan. That plan does not allow you to carry over funds. [Include next sentence if applicable] However, you may continue to use funds remaining in that account during the grace period, which ends on [Month xx, 20xx].

With open enrollment just around the corner, it’s a great time to review your spending and consider your health FSA election amount – keeping the $[500 or lesser max limit] carryover in mind. The carryover funds do not count against your health FSA election for the following plan year. You may elect up to $[Election max limit] and carry over up to $[500 or lesser max limit] of unused funds. Be aware that the minimum amount the plan allows you may carry over is $[minimum amount].

When deciding your election amount, taking the time to reflect your lifestyle and health care needs will help you make the most of your FSA. Go to www.conexis.com/myfsa and use the CONEXIS online calculators to help you figure out how much to put into your FSA. On the site, you can also find a complete list of eligible FSA expenses and more information about your CONEXIS FSA.

[Use this paragraph if you choose Option 1 and require participants to spend down FSA funds.]

If you plan to have a health savings account (HSA), unused funds remaining in your health FSA can affect your eligibility to establish and contribute to an HSA. Be aware that if you carry over unused funds from a general-purpose health FSA into the following plan year, you cannot contribute to an HSA during that entire plan year. To avoid this, please spend the funds left in your health FSA before the plan year ends. You must also spend your carryover balance.

[Use this paragraph if you choose Option 2 and a limited-purpose FSA is available]

If you plan to have a health savings account (HSA), unused funds remaining in your health FSA can affect your eligibility to establish and contribute to an HSA. Be aware that if you carry over unused funds from a general-purpose health FSA into the following plan year, you cannot contribute to an HSA during that entire plan year. However, you may transfer carry over unused funds (up to the maximum limit) to a limited-purpose FSA since it’s a plan that is compatible with an HSA. To do this, please complete the form [insert details about how to access the form and when/where to return it].

[Use the two paragraphs below if you choose Option 3 and participants can waive carryover funds.]

If you plan to have a health savings account (HSA), unused funds remaining in your health FSA can affect your eligibility to establish and contribute to an HSA. Be aware that if you carry over unused health FSA funds into the following plan year, you cannot contribute to an HSA during that entire plan year. However, you may waive your health FSA carryover funds so you can be eligible to set up an HSA. To do this, please complete the form [insert details about how to access the form and when/where to return it].

During the run-out period, you may continue to submit reimbursement requests for eligible expenses incurred during the plan year. If the claims you submit during the run-out period do not use all remaining health FSA funds, then you will waive your health FSA balance by [Month xx, 20xx].

If you have any questions about the new carryover feature or our FSA plan in general, please contact [enter contact information here].