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DIVISION MEMORANDUM 2016-07

TO THE HEADS OF ALL STATE AGENCIES

September 27, 2016

ATTENTION:   Personnel and Payroll Officers, Chief Administrative and Fiscal Officers, and Business Managers
SUBJECT:   Open Enrollment for Dependent Care Assistance Program and Medical Flexible Spending Account Program for Plan Year 2017

I. INTRODUCTION

The purpose of this memorandum is to (1) announce the annual open enrollment period for the Dependent Care Assistance Program (DCAP) and the Medical Flexible Spending Account Plan (MEDFLEX), and (2) publicize the Qualified Transportation Account (QTA) program. These programs allow participants to pay for eligible expenses on a tax-free basis.

II. ANNUAL OPEN ENROLLMENT

The open enrollment period for the 2017 Plan Year for the DCAP and MEDFLEX begins Saturday, October 1, 2016, and ends Monday, October 31, 2016. Please display the attached DCAP and MEDFLEX fliers on agency bulletin boards and send a mass email informing your agency's employees about the open enrollment period no later than September 29, 2016. It is also recommended that a reminder email be sent out no later than October 20, 2016.

If you believe that your agency's employees would benefit from an onsite session about these programs please contact the Employee Benefits Unit at the number below to schedule one with the plans' administrator, Progressive Benefit Solutions (PBS).

III. PROCESSING PROCEDURES

A. Open Enrollment Process

Employees are responsible for obtaining the necessary enrollment forms and returning them to PBS before the Monday, October 31st deadline. Current participants in the DCAP and MEDFLEX will receive notice of the open enrollment directly from PBS.

All election forms must be submitted by Monday, October 31, 2016; they can be returned by mail, email or fax. Forms sent by mail must be postmarked no later than October 31, 2016. Employees who fail to return enrollment forms by the deadline will not be permitted to participate in the DCAP or MEDFLEX for the 2017 Plan Year. No late applications will be accepted; no exceptions will be made.

Employees who are out on a leave of absence should not enroll in the DCAP or MEDFLEX until they return to work. They will have 31 days after returning to work to enroll in the plans. New employees have 31 days after the date of hire to enroll in these plans.

B. Payroll Procedures:

PBS will perform payroll processing for all DCAP, MEDFLEX and the QTA enrollments. Agencies are not responsible for processing enrollment applications.

C. Open Enrollment Forms:

Form CO-1306 should be used to enroll in MEDFLEX. For DCAP enrollment Form CO-1310 should be used. The QTA enrollment form is CO-1312 and can be submitted at any time. Employees may obtain open enrollment forms from the PBS web site: www.ctpbs.com  or by contacting PBS toll free at 1-866-906-8023.

D. Election Changes:

Once MEDFLEX and DCAP elections are made for Plan Year 2017 they cannot be changed unless, the Participant:

1. Experiences a qualifying status change, such as marriage, divorce, death of a spouse or dependent, birth or adoption of a child, or a spousal employment status change, or
 
2. Terminates employment.

Any mid-year election change must be submitted to PBS within 31 days of the qualifying event and must be consistent with the status change. Forms for mid-year elections (MEDFLEX, Form CO-1306a and DCAP Form CO-1310a) will be available online after open enrollment has ended.

IV. "USE IT OR LOSE IT" RULE

The DCAP and MEDFLEX Plans are subject to the IRS' "use it or lose it rule", which means that amounts set aside in these tax-free accounts will be forfeited unless they are used for eligible expenses incurred during the Plan Year. For this reason, employees are urged not to set aside more for the DCAP or MEDFLEX than you realistically expect to pay for eligible Plan Year expenses.

MEDFLEX participants can carry over up to $500 in unspent funds from one plan year to the next. This means that those with MEDFLEX balances of $500 or less at the end of Plan Year 2016 will be able to use those funds for eligible expenses during the upcoming plan year. Unused funds over $500 will be forfeited after the run-out period ends on March 31, 2017.

If an employee participated in the MEDFLEX in 2016 but does not enroll for next year, that member (if still employed) will be able to use up to $500 in unspent MEDFLEX funds for eligible expenses incurred during 2017. However, to prevent the Plan from being assessed unnecessary administrative costs, unspent balances under $25 will be forfeited by those who do not enroll for Plan Year 2017.

V. CONTRIBUTION LIMITS

The minimum contribution is $520. The maximum deferral for MEDFLEX is currently $2,550. (These amounts are not affected by any funds carried over from the previous plan year.) The Internal Revenue Service typically announces any increase in the medical FSA maximum during the third week of October. If the annual maximum is increased for 2017, we will issue a supplemental notification to give employees an opportunity to revise their elections before the October 31st deadline.

For DCAP, the maximum deferral for Plan Year 2017 is $5,000. If you are married, filing separately, your maximum pre-tax deferral will be $2,500. The minimum Plan Year contribution for DCAP is $520.

For the QTA, the minimum monthly contribution is $20. The maximum monthly amount a participant can defer is $255 for Transit and $255 for Parking.

VI. CONCLUSION

These benefits help employees save money on necessary expenses by reducing their taxable income. Please make sure that your agency's employees get this information promptly so that they have sufficient time to make elections for 2017.

Questions concerning the DCAP and MEDFLEX open enrollment period or the QTA may be directed to PBS at 1-866-906-8023. Questions pertaining to this memorandum may be directed to the Healthcare Policy & Benefit Services Division, Employee Benefits Unit at (860) 702-3570.

Very truly yours,

Thomas C. Woodruff, Ph.D., Director

Attachments

DCAP Open Enrollment Flyer
MEDFLEX Open Enrollment Flyer 

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