A temporary rule that allowed covered employees to make mid-year election changes to their health plans and revisit how much they set aside into their flexible spending accounts (FSAs) will sunset at the end of the year.
The rules gave employers the option to allow their employees to make changes to their health plans, including choosing a new offering, but it did not require that they allow them to make these changes.
The more relaxed rules were the result of provisions in the Consolidated Appropriations Act, 2021, which was signed into law in December 2020 by President Trump, and subsequent regulatory guidance by the IRS.
In response to the COVID-19 pandemic, the IRS liberalized the rules for cafeteria plan mid-year election changes for health plans and FSAs in the 2021 plan year. During 2021, employers may permit employees to make election changes without affecting their status. The rules that were relaxed:
But, all plans that take effect on or after Jan. 1, 2022 will revert to the old rules that bar mid-year election changes and limit the grace period for spending unused FSA funds to just two and half months after the end of the prior policy year.
The rules coming to an end will only affect those employers who opted to allow their employees to make changes to their health plan choices and/or their FSAs. If you didn't make this move, there is nothing you need to do.
If you did permit your staff to make these mid-year changes, you will need to communicate to them as soon as possible and before and during open enrollment that mid-year changes will not be possible in 2022.
When telling them about the rules change, make sure to inform them of the permanent rules and when they take effect again.
Also, if you extended the grace period and/or the carryover amount for FSAs, inform them that the carryover grace period will revert to two and half months and that the maximum carryover amount will revert to $500.
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