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<h1><a name="_Hlk129677731"></a><span style="mso-bookmark:_Hlk129677731"><span style="font-size:11.0pt;line-height:105%;font-family:"Arial",sans-serif"><img width="153" height="59" id="_x0000_i1025" src="cid:image001.png@01D957EC.2939EA20"></span></span><span style="mso-bookmark:_Hlk129677731"><span style="font-size:11.0pt;line-height:105%;font-family:"Arial",sans-serif"><o:p></o:p></span></span></h1>
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<p class="MsoNormal"><span style="mso-bookmark:_Hlk129677731"><span style="font-family:"Arial",sans-serif"> <o:p></o:p></span></span></p>
<p class="MsoNormal"><span style="mso-bookmark:_Hlk129677731"><span style="font-family:"Arial",sans-serif">March 16, 2023<o:p></o:p></span></span></p>
<p class="MsoNormal"><span style="mso-bookmark:_Hlk129677731"><span style="font-family:"Arial",sans-serif"> </span></span><span style="mso-bookmark:_Hlk129677731"><span style="font-size:6.0pt;font-family:"Arial",sans-serif"><o:p></o:p></span></span></p>
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<span style="mso-bookmark:_Hlk129677731"><span style="font-family:"Arial",sans-serif">To:<o:p></o:p></span></span></p>
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<span style="mso-bookmark:_Hlk129677731"><span style="font-family:"Arial",sans-serif">Department Benefits Representatives<o:p></o:p></span></span></p>
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<span style="mso-bookmark:_Hlk129677731"><span style="font-family:"Arial",sans-serif">From:<o:p></o:p></span></span></p>
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<span style="mso-bookmark:_Hlk129677731"><span style="font-family:"Arial",sans-serif">Central HR Benefits Office on behalf of UC Office of the President<o:p></o:p></span></span></p>
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<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="mso-bookmark:_Hlk129677731"><span style="font-family:"Arial",sans-serif">Re:<o:p></o:p></span></span></p>
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<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="mso-bookmark:_Hlk129677731"><span style="line-height:110%;font-family:"Arial",sans-serif">Health Flexible Spending Account and Health Savings Account Eligibility Clarification</span></span><span style="mso-bookmark:_Hlk129677731"><span style="font-family:"Arial",sans-serif"><o:p></o:p></span></span></p>
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<p class="MsoNormal"><span style="mso-bookmark:_Hlk129677731"><span style="font-size:10.0pt;font-family:"Arial",sans-serif">_______________________________________________________________________________________________<o:p></o:p></span></span></p>
<p class="MsoNormal"><span style="mso-bookmark:_Hlk129677731"><b><span style="font-family:"Arial",sans-serif"><o:p> </o:p></span></b></span></p>
<p class="MsoNormal"><span style="mso-bookmark:_Hlk129677731"><b><span style="font-family:"Arial",sans-serif">DBRs: Please share this very important information via your internal department listserv.<o:p></o:p></span></b></span></p>
<span style="mso-bookmark:_Hlk129677731"></span>
<p class="MsoNormal"><span style="font-size:8.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">UCOP has provided clarification
<s>o</s>n the rules of interaction of the Health Savings Accounts (HSA) and Health Flexible Spending Accounts (FSA) during a tax year.<span style="color:black"> Please note that these rules do not apply to participation in the UC Dependent Care FSA.</span></span><span style="font-family:"Arial",sans-serif;color:black"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:7.0pt;font-family:"Arial",sans-serif;color:black"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial",sans-serif;color:black">UC Legal has advised that:</span><s><span style="font-family:"Arial",sans-serif"><o:p></o:p></span></s></p>
<p class="MsoNormal"><span style="font-size:8.0pt;font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-indent:-.25in;mso-list:l0 level1 lfo1">
<![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman"">
</span></span></span><![endif]><span style="font-family:"Arial",sans-serif">UC employees may not participate in the UC Health FSA when enrolled in the UC Health Savings Plan since the UC Health Savings Plan is paired with a UC Health Savings Account.
<o:p></o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:1.0in;margin-bottom:.0001pt;text-indent:-.25in;mso-list:l0 level2 lfo1">
<![if !supportLists]><span style="font-family:"Courier New""><span style="mso-list:Ignore">o<span style="font:7.0pt "Times New Roman"">
</span></span></span><![endif]><span style="font-family:"Arial",sans-serif">IRS regulations prohibit concurrent enrollment in a general-purpose Health FSA and a Health Savings Account.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:7.0pt;font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-indent:-.25in;mso-list:l0 level1 lfo1">
<![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman"">
</span></span></span><![endif]><span style="font-family:"Arial",sans-serif">UC employees may not shift from being enrolled in the UC Health FSA to being enrolled in the UC Health Savings Plan
<u>during the same tax year</u>.<o:p></o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:1.0in;margin-bottom:.0001pt;text-indent:-.25in;mso-list:l0 level2 lfo1">
<![if !supportLists]><span style="font-family:"Courier New""><span style="mso-list:Ignore">o<span style="font:7.0pt "Times New Roman"">
</span></span></span><![endif]><span style="font-family:"Arial",sans-serif">Under IRS rules, participation in the UC Health FSA at any time in a tax year results in the individual being ineligible for contributions to a UC Health Savings Account during that
tax year. Since the UC Health Savings Plan is paired with a UC Health Savings Account, an individual enrolled in the UC Health FSA cannot enroll in the UC Health Savings Plan in the middle of a year, such as during a qualifying Life Event.<o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left:.75in"><span style="font-size:7.0pt;font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-indent:-.25in;mso-list:l0 level1 lfo1">
<![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman"">
</span></span></span><![endif]><span style="font-family:"Arial",sans-serif">UC employees may not enroll in the UC Health FSA if moving from the UC Health Savings Account with HSA to a different UC medical plan
<u>during a tax year.</u><o:p></o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:1.0in;margin-bottom:.0001pt;text-indent:-.25in;mso-list:l0 level2 lfo1">
<![if !supportLists]><span style="font-family:"Courier New""><span style="mso-list:Ignore">o<span style="font:7.0pt "Times New Roman"">
</span></span></span><![endif]><span style="font-family:"Arial",sans-serif">IRS regulations do not explicitly allow changing from an UC HSA to a UC Health FSA mid-year.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:7.0pt;font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-indent:-.25in;mso-list:l0 level1 lfo1">
<![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman"">
</span></span></span><![endif]><span style="font-family:"Arial",sans-serif">If an employee is participating in the UC Health FSA and wishes to transfer to the UC Health Savings Plan with Health Savings Account
<u>at the start of a new plan year</u>, the balance remaining in the Health FSA (up to the IRS carry-over maximum) may be transferred to a Limited Purpose FSA and used within one year. UC instituted a Limited Purpose Flexible Spending Account on January 1,
2023. However, the existence of UC’s Limited Purpose FSA does not override the IRS rule that participation in the Health FSA at any time in a tax year results in the individual being ineligible for contributions to a Health Savings Account during that same
tax year; therefore, employees may not transfer from the UC Health FSA to the UC Limited Purpose FSA in the middle of a year.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:7.0pt;font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-indent:-.25in;mso-list:l0 level1 lfo1">
<![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman"">
</span></span></span><![endif]><span style="font-family:"Arial",sans-serif">These rules apply equally to UC employees who are married to each other; for example, one spouse cannot have an HSA in the same tax year that the other spouse is in enrolled in the
Health FSA. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:7.0pt;font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-indent:-.25in;mso-list:l0 level1 lfo1">
<![if !supportLists]><span style="font-family:Symbol"><span style="mso-list:Ignore">·<span style="font:7.0pt "Times New Roman"">
</span></span></span><![endif]><span style="font-family:"Arial",sans-serif">If a UC employee enrolled in the Health FSA terminates employment with UC, their new employer may have their own rules that allow enrollment in a Health Savings Account, as long as
the effective dates of the accounts do not overlap.<o:p></o:p></span></p>
<p class="MsoListParagraph" style="mso-margin-top-alt:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt">
<span style="font-size:7.0pt;font-family:"Arial",sans-serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial",sans-serif">UCOP is working with the UCPath Center to create automated processes to ensure only eligible elections are allowed; in the meantime, manual audits are being conducted to identify ineligible enrollments.
While it remains the employee’s responsibility to follow IRS regulations regarding participation in tax-advantaged programs, UC wants to be a collaborative partner to help UC employees remain in compliance.
</span><span style="font-size:9.0pt"><o:p></o:p></span></p>
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