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</head>
<body lang="EN-US" link="#0563C1" vlink="#954F72">
<div class="WordSection1">
<h1><img width="192" height="73" id="Picture_x0020_1" src="cid:image002.png@01D832DC.4F62D260"></h1>
<p class="MsoNormal"><o:p> </o:p></p>
<table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse">
<tbody>
<tr>
<td width="624" colspan="2" valign="top" style="width:6.5in;padding:0in 5.4pt 0in 5.4pt">
<p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal">
<span style="font-family:"Arial",sans-serif">March 8, 2022<o:p></o:p></span></p>
<p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal">
<span style="font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
</td>
</tr>
<tr>
<td width="78" valign="top" style="width:58.5pt;padding:0in 5.4pt 0in 5.4pt">
<p class="MsoNormal" style="mso-margin-top-alt:6.0pt;margin-right:0in;margin-bottom:6.0pt;margin-left:-.7pt;text-align:justify;line-height:110%">
<span style="font-family:"Arial",sans-serif">To:<o:p></o:p></span></p>
</td>
<td width="546" valign="top" style="width:409.5pt;padding:0in 0in 0in 0in">
<p class="MsoNormal" style="mso-margin-top-alt:6.0pt;margin-right:0in;margin-bottom:6.0pt;margin-left:-.7pt;text-align:justify;line-height:110%">
<span style="font-family:"Arial",sans-serif">Department Benefit Representatives<o:p></o:p></span></p>
</td>
</tr>
<tr>
<td width="78" valign="top" style="width:58.5pt;padding:0in 5.4pt 0in 5.4pt">
<p class="MsoNormal" style="mso-margin-top-alt:6.0pt;margin-right:0in;margin-bottom:6.0pt;margin-left:-.7pt;text-align:justify;line-height:110%">
<span style="font-family:"Arial",sans-serif">From:<o:p></o:p></span></p>
</td>
<td width="546" valign="top" style="width:409.5pt;padding:0in 0in 0in 0in">
<p class="MsoNormal" style="mso-margin-top-alt:6.0pt;margin-right:0in;margin-bottom:6.0pt;margin-left:-.7pt;text-align:justify;line-height:110%">
<span style="font-family:"Arial",sans-serif">HR Benefits Office on behalf of UC Office of the President<o:p></o:p></span></p>
</td>
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<tr>
<td width="78" valign="top" style="width:58.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt">
<p class="MsoNormal" style="mso-margin-top-alt:6.0pt;margin-right:0in;margin-bottom:6.0pt;margin-left:-.7pt;text-align:justify;line-height:110%">
<span style="font-family:"Arial",sans-serif">Re:<o:p></o:p></span></p>
</td>
<td width="546" valign="top" style="width:409.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in">
<p class="MsoNormal" style="mso-margin-top-alt:6.0pt;margin-right:0in;margin-bottom:6.0pt;margin-left:-.7pt;line-height:110%">
<span style="font-family:"Arial",sans-serif">2021 DepCare FSA Plan Change to Pre-Taxable Contributions for Highly-Compensated Employees<o:p></o:p></span></p>
</td>
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<tr>
<td width="624" colspan="2" valign="top" style="width:6.5in;border:none;padding:0in 5.4pt 0in 5.4pt">
<p class="MsoNormal" style="mso-margin-top-alt:6.0pt;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif">Certain benefits programs, including UC’s Dependent Care Flexible Spending Account (DepCare), are given favorable tax treatment under Internal Revenue Code Sections 125 and 129. Because Flexible Spending Account
(FSA) plans offer these tax benefits, they are highly regulated by the IRS. <o:p>
</o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif">To ensure non-highly compensated employees receive their share of the tax benefits offered through the plan, the IRS requires employers to conduct non-discrimination testing (NDT). The non-discrimination rules are
generally designed to prevent plans from allowing highly paid individuals to benefit at a higher percentage than non-highly paid individuals.<o:p></o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif">In 2021, UC’s DepCare Flexible Spending Account plan did not comply with one of the IRS Non-Discrimination Tests.
<o:p></o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif">To rectify this situation, some of the contributions made to the DepCare FSA by highly-compensated employees in 2021 will be reported to the IRS as taxable wages on their 2022 W-2 form. This change does not affect
the taxable income reported on affected participants’ 2021 W-2 forms or their 2021 income tax filings.
<o:p></o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif">Contributions to the 2021 DepCare plan account in excess of the new pre-tax amount, for which participants have not yet been reimbursed for claims, will be refunded, less applicable payroll taxes. Refunds will be
issued by UCPath no later than April 30, 2022.<o:p></o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif">Information about this change will also be posted on UCnet before a communication is sent to affected participants on Friday, March 11.<o:p></o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.7pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.9pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif">In the future, UCOP will be notifying 2022 DepCare FSA participants via email and postal mail that UC reserves the right to modify their election amounts mid-year in order to ensure compliance with IRS non-discrimination
rules. <o:p></o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.9pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:-.9pt;margin-bottom:.0001pt;line-height:110%">
<span style="font-family:"Arial",sans-serif">For questions, contact the UCPath Center at (855) 982-7284 for further assistance.<o:p></o:p></span></p>
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