Have You Considered Extending the Run-Out Period for Your Dependent Care FSA in Light of COVID-19?
Almost all employers that sponsor a Dependent Care Flexible Spending Account Plan (DC FSA) provide for a run-out period in the plan. A run-out period is the period of time in the following plan year that DC FSA participants can submit reimbursements for expenses incurred in the prior year. Most DC FSA plans run on a calendar year and a very common run-out period is either 90 days or until March 31st. In other words, many run-our periods for 2019 are expiring this week.
Right now, many of the child care facilities are shut down. This may be creating an obstacle for your participants in getting the receipts to submit for substantiation. To provide relief to employees, a plan sponsor could change this run-out period temporarily. The law does not mandate the length of a run-out period, so it could be extended to 120 days, June 30th, or another date that you feel will give employees sufficient time to submit reimbursements. This may be a small but easy way to provide relief to employees during this time of emergency.
If you do not self-administer your DC FSA Plan, check with your vendor right away to see if they can administer this change and what they need from you to make the change. You should then communicate the change to your DC FSA participants right away. Since DC FSAs are not subject to ERISA, this communication doesn’t need to follow the strict DOL disclosure requirements, but rather could be in the form of an email or other method that is reasonably anticipated to reach your employees. Your plan document should be amended to reflect this change, but this can be done at any time prior to the end of the plan year (December 31st for calendar year plans).