[UCRDBR] DepCare FSA Election Reduction for Highly Compensated Members

[Departmental Benefits Representatives]

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February 23, 2023

To:
Department Benefits Representatives
From:
Central HR Benefits Office on behalf of the UC Office of the President
Re:
DepCare FSA Election Reduction for Highly Compensated Members

_________________________________________________________________________

Employees who elect to participate in the DepCare Flexible Spending Account (FSA) and who are defined by the IRS as "highly-compensated employees" ("HCEs" - those who earned $135,000 or more in 2022), must have their annual contributions limited in order for UC to satisfy the IRS' non-discrimination requirements for the plan.  For 2023, UC determined that the annual maximum election amount for HCEs is $3,000. The limit was noted in the UCPath Open Enrollment portal; however, some HCEs elected more than the allowed amount.

Communications have been sent to employees who:


*       Are participating in the DepCare FSA in 2023, and

*       Meet the IRS' definition of "highly-compensated employee," and

*       Elected to contribute more than $3,000 to their DepCare FSA this year, and

*       Must have their annual contribution reduced to $3,000 in order for UC to satisfy IRS non-discrimination requirements

Note that in the case of spouses both employed by UC, the reduction in the HCE's election does not create a qualifying event for the spouse of the HCE to enroll in DepCare FSA or change their election amount.

The communications explain the IRS' mandatory non-discrimination testing requirement<https://hr.ucr.edu/sites/default/files/2023-02/2023_depcare_hce_irs_ruling.pdf> and remind participants that the University reserves the right to reduce contributions to the plan HCEs<https://hr.ucr.edu/sites/default/files/2023-02/depcare_contribution_adjustments.pdf> during the plan year in order to comply with IRS regulations.  The communications were postal-mailed on February 16, 2023 and email communications sent on February 21, 2023. Affected participants' election amounts are being adjusted in the UCPath Center system, and corrected amounts will be sent to WEX.

For questions, impacted members may contact the UCPath Center at 855.982.7284 Monday - Friday, 8:00 a.m. to 5:00 p.m.
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