FSA Plan Termination due to company acquistion - mid year election allowed?

Our company was acquired earlier this year.  We have been told that the existing benefits will terminate on 6/30 and that employees will be given the option to enroll in the New/Acquiring company's benefits.  I am getting several questions from FSA participants wanting to know if they can stop contributing to their FSAs given that the plan is scheduled to terminate on 6/30 (normally the plan year is 1/1-12/31.) Participants are being told that they must incur expenses prior to 6/30 and some are claiming that this isn't fair because they had intended to use the money later in the year and they shouldn't be forced to keep contributing, knowing that the plan will end early.

I have never dealt with a situation like this and can't find anything that specifically addresses the situation.  Can participants make a mid-year election change because the plan has been altered to end early?

TIA

Unfortunately, the impending termination of the plan is not a mid-year permitted election change event.  Those elections remain irrevocable (absent another permitted election change event) under the Section 125 cafeteria plan through the remainder of the (short/final) plan year.

There are ways to address this issue with moving elections/balances to the new plan (or retaining the existing plan) post-close.  You might inquire as to whether they have considered that option.

• Here's an overview: https://www.newfront.com/blog/merger-acquisition-rules-health-fsa-2

Here's a quick slide summary:

2024 Newfront M&A for H&W Employee Benefits Guide