Welfare Benefit Plan ERISA News
December 2013

Which is Better, Grace Period or Carryover Provision?
The IRS has announced new relief from the "use it or lose it" rule that will allow health FSA (but not dependent care FSA) participants to carry over up to $500 of unused contributions to the next plan year. The carryover can be indefinite, continuing from year-to-year until it is used up or forfeited when the participant terminates. Offering carryovers will require a plan amendment.

Many existing plans have a "grace period" that allows all unused amounts to be spent down during the 2½ months following the plan year. However, a health FSA cannot have both a carryover and a grace period. To offer carryovers, a health FSA with a grace period must be amended to eliminate the grace period.

Eliminating the grace period can pose a difficult choice for an employer. On the one hand, the grace period allows more than $500 to be carried over, but only for 2½ months. On the other hand, the carryover is capped at $500, but it can be carried over indefinitely. Some participants will be better off with a grace period and others with a carry over.

Another difficult choice relates to HSAs. Unused carryover amounts may be prevent HSA contributions until they are used up. More and More IRS Notice 2013-71

CMS Encourages Commissioners to Un-cancel Policies
"The Obama administration on Nov. 14 proposed an administrative fix to allow individuals and small businesses losing coverage to keep their plans for another year. The fix was necessary in part because many people who lost coverage: (1) could not enroll for coverage on reform-mandated state-based health insurance exchanges due to problems with the government's enrollment website; or (2) found that exchange coverage was far more expensive than the individual and small-group coverage they lost." Read Full Article Department of Health & Human Services Memo
ERISA Trivia
When will my group medical insurance be effective in these scenarios?.

1. I was hired on 9/25/13. Our waiting period is 6 months with coverage beginning on the 1st of following month. Our ERISA Plan Year is 1/1-12/31. On 1/1/14, the waiting period will change to 60 days with coverage beginning on the first of the following month, in order to comply with PPACA.

2. I was hired on 11/15/13. Our waiting period is 90 days with coverage beginning the next day, which complies with PPACA. Our ERISA Plan Year is 2/1-1/31. On 2/1/14, our waiting period will change to 0 days with coverage beginning on date of hire.

3. I was hired on 12/15/13. Our waiting period is 60 days with coverage beginning the 1st of the following month, which complies with PPACA. Our ERISA Plan Year is 2/1-1/31.

My Answers





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© 2017 ERISAPros, LLC, All rights reserved. Information on ERISAPros' website, its newsletter, “News & Views,” and its blog, “ERISA Wonk,” is published as a general informational source. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Blog posts and comments reflect the personal views of their respective authors - not those of ERISAPros. Transmission of this information does not create an attorney-client relationship. ERISAPros, LLC is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. ERISA is a complicated and confusing law. Summary Plan Descriptions (SPDs), Wrap Plan Documents, and Form 5500s require review and updating by qualified ERISA compliance professionals.


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