Grace Period

SISC ANNOUNCES ADDITION OF 2-1/2 MONTH GRACE PERIOD
TO FLEX PLAN

SISC is pleased to announce that we have implemented a 2 ½ month grace period, recently approved by the IRS, for submitting eligible expenses. You now have until March 15 of the following year to incur eligible expenses for the current Plan Year. While this does not eliminate the use-it-or-lose-it rule completely, you now have more time to avoid forfeiting unused funds. 

If you have a balance remaining in your Qualified Health Care Expense account as of December 31, you can use those funds for eligible expenses incurred from January 1 through March 15 of the following year. This is effective immediately, so for the 2005 Plan Year, you have until March 15, 2006 to incur eligible expenses. And, if your 2005 balance is not sufficient to reimburse you in full for expenses incurred through March 15, 2006, the unpaid balance will be paid out of your 2006 account if you re-enrolled during open enrollment. If you do not re-enroll, you cannot be reimbursed in full for those expenses.

Read below for more information on this change.
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Will this grace period affect forfeited amounts from the 2003 or 2004 plan years in any way?  No.

Will the grace period apply to the 2005 benefit year?  Yes. The change is effective immediately. You now have until March 15, 2006 to incur eligible expenses using your 2005 election.

Can I use my Debit card to pay for grace period expenses?  No. Your Debit card can only be used for purchases that apply to current Plan Year. All prior year expenses must be reimbursed using paper claim forms.

How long would I have to incur eligible expenses for the current Plan Year?  You have from January 1 until March 15 of the following year, for a total of 14 ½ months.

Will the grace period allow me to increase my 2005 election since I'll have a longer time to spend money?  No.  A grace period is not a Qualified Status Change.  It will not allow you to increase your annual election for 2005.

I used up all of my 2005 account balance already. If I enroll for 2006, can I use 2006 monies to pay for expenses I incur between now and December 31, 2005?  No. Once your 2005 account balance reaches zero, you will no longer be reimbursed for claims submitted. In short, the 2005 benefit year is over for you and the grace period for the 2005 Plan Year would have no effect on your account.

How would the 2005 grace period impact my account if I re-enroll for 2006?  Eligible expenses incurred during the grace period (January 1 thru March 15, 2006) would first be paid from any funds remaining in your 2005 account. Eligible expenses incurred during the grace period that could not be paid in full from your 2005 account would be paid from your 2006 account. But your 2006 account cannot be used to pay for expenses incurred in 2005.

What about the "use-it-or-lose-it" rule imposed by the IRS?  It would still apply. Using 2005 as an example, the current "use-it-or-lose-it" date would change from December 31, 2005 to March 15, 2006.

How will the grace period impact the deadline for filing 2005 claims?  The deadline for claims to be received in the SISC office is still March 31 of the year following the plan year end.

What is use-it-or-lose-it?  Use-it-or-lose-it refers to an IRS requirement that if you do not spend all the money you have elected into your qualified health care flexible spending account, the money remaining in the account after March 15 of the following year will be forfeited because it cannot be rolled over or refunded to you.
 
What are the key dates to remember?
Plan Year:  January 1 – December 31
Eligible expenses reimbursable if incurred by: March 15 following close of Plan Year
Eligible expenses reimbursable if claim received in SISC office by: March 31 following close of Plan Year.