FSA/DCAP automatic elections

[Guest cshade]

Is allowing automatic rollovers a good practice to have for FSA/DCAP? We are a TPA who administer 125 plans. I don't recommend automatic FSA/DCAP renewals, but that participants make new elections each year due to the many changes that can take place with medical and daycare expenses. I have a new broker that is 'selling' automatic rollover (to decrease the amount of paperwork for the group, I imagine). Could I get some feedback with regards to this? Thank you in advance.

[QDROphile]

I vote against as a policy.

[MARYMM]

I vote against as a policy.

Why ? What are the issues ? Thanks

[Chaz]

One issue is that some employees are going to get pissed off if they are deemed to make an irrevocable election that they didn't want to make.

If you go ahead with this scheme (and I advise not), from a legal point of view, you have to make sure that the initial election form clearly states that the elections carry over from year-to-year unless the employee affirmatively changes it. If not, the above mentioned p.o.'ed employees will have more grounds for a beef.

There is also the issue of undoing invalid "elections" (due to, for example, a child aging out of the DCAP).

[MARYMM]

One issue is that some employees are going to get pissed off if they are deemed to make an irrevocable election that they didn't want to make.

If you go ahead with this scheme (and I advise not), from a legal point of view, you have to make sure that the initial election form clearly states that the elections carry over from year-to-year unless the employee affirmatively changes it. If not, the above mentioned p.o.'ed employees will have more grounds for a beef.

There is also the issue of undoing invalid "elections" (due to, for example, a child aging out of the DCAP).

Thanks. It's not my choice to make.

I guess it all depends on the employee population. When I worked for the law firm, they would have been po'd if their elections expired . The opposite scenario is more likely at my current employer - not understanding that it was a standing election.

[oriecat]

I think it's an absolutely horrible idea. Everyone's medical and dependent care situations can change year to year. People need to think about these things.

[SLuskin]

My company administers Section 125 plans and we do not give the option of medical FSA/DCAP rollovers for all the reasons correctly stated abouve.