Change in plan year

[Guest sphile]

We are changing our plan year for our FSA from 1/1-12/31 to 7/1-6/30. What happens with the money that has been deferred? Can this amount be rolled over into the new plan year or for those that spent more than has been contributed can that be deducted from the new plan year?

[papogi]

For your 1/1/04 to 6/30/04 time period, you should have held a short plan year in preparation for the change on 7/1/04. That would have avoided this issue, but assumes you knew about the upcoming change (not always true!). You need to start your new plan year on 7/1, and there’s nothing you can do about the elections prior to that, as I see it. Those that no longer need the account can stop it on 7/1 with no more contributions. Even those that elect new accounts on 7/1 can still access their full original annual election with dates of service prior to 7/1. I don't see any way around it. You can't force them to continue deductions once the new plan year starts. This additional exposure that the employer has is a result of the less-than-perfect planning on the employer’s part. Any chance this can be pushed off until 7/1/05? That way, you can advertise a 6 month plan year for 1/1/05-6/30/05 and avoid all this.