Compared to other impacts of COVID such as widespread unemployment, the proliferation of serious illness and the devastating statistics around loss of life, the possibility of losing some FSA money at the end of the year may seem trifling.
But it’s not.
FSA balance forfeitures can impact employees’ financial wellness and spill over into dissatisfaction with their benefits. If employees lose money, this may impact their participation in coming years. Forfeiture is an issue employers need to address as 2020 draws to an end and the clock runs out on this year’s FSA dollars.
When employees made their 2020 FSA elections, it’s highly unlikely anyone factored in the potential impact of a pandemic on their healthcare expenditures. As a result, FSA participation and contributions were in line with the previous few years. According to information on our Benefitsolver® system, about 15% of eligible employees contributed to a 2020 healthcare FSA, and the average contribution was $1,321.
As COVID-19 began to impact the nation, two developments potentially impacted employees’ use of their healthcare FSA.
With this guidance, employees would be able to change their contribution amount, disenroll from the plan if they had previously enrolled or enroll in the plan if they had waived. The changes would be retroactive to Jan. 1, but only if their employer chose to offer an enrollment opportunity.
For those employees whose employer pursued this remedy, there was no guarantee that any changes they made would benefit them. Employees could have disenrolled only to then face unforeseen out-of-pocket costs. Others might have decided to enroll or put in more dollars to help pay for elective procedures or dental work just to have appointments cancelled or deferred.
Peoples’ beliefs about COVID likely influenced any mid-year decisions they made about their FSA. Depending on where in the country someone lives and how they get their news, there have been vastly different experiences and perspectives on this pandemic. Add that the nation’s public health situation has evolved quickly and is constantly changing and making the “right” mid-year change may have been more a matter of luck than informed decision-making.
All this leaves some employees sitting on unused funds as Dec. 31 looms large.
Depending on your FSA plan design, now is the time to remind employees about any existing balance and what their options are. Even if they don’t have out-of-pocket costs related to deductibles or coinsurance, they can still stock up on certain essentials and avoid losing FSA dollars.
COVID-19 has created challenges for some employees with FSAs. They may have had more or fewer expenses in 2020, and they may have made changes mid-year that either helped or made matters worse. As a result, at a time when many people are concerned about healthcare costs and financial well-being forfeiting hard-earned FSA dollars may be more painful than in years past.
Employers can help address the potential for widespread forfeiture by proactively communicating to any employees with a balance to help support them in appropriately using any remaining funds appropriately. This addresses the needs of employees while serving as a tangible demonstration of the kind of workplace empathy that keeps employees engaged.
Learn more about the Holiday Stock Up Challenge – where you can help employees spend those FSA dollars, and help people in need this holiday season.