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California Law Requires Employers to Provide Notices to FSA Participants



Cal. Lab. Code § 2810.7

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California has enacted a law that requires employers with flexible spending accounts, including health FSAs, DCAPs, or adoption assistance FSAs, to notify account participants of “any deadline to withdraw funds before the end of the plan year.” (This situation might arise, for example, if there is a special claims submission deadline for participants who terminate employment midyear.) The notice must be provided in two different forms, one of which may be electronic. According to the law, permitted forms of notice include (but are not limited to) in-person notification, email, telephone, text message, and postal mail. The law is effective January 1, 2020.

EBIA Comment: While we do not typically cover state-law developments, we wanted to bring this law to the attention of our readers. The law’s text is quite short and leaves open multiple issues. For example, the law does not indicate when the required notices are to be provided. Furthermore, ERISA likely preempts the law as applied to health FSAs that are ERISA plans. (DCAPs and adoption assistance FSAs are rarely subject to ERISA, nor are health FSAs that are governmental or church plans, so the law is potentially applicable to these programs.) But even in situations where ERISA applies, employers may decide to comply with this law for consistency and ease of administration, and because frequent communication of claim-related deadlines is good practice. Indeed, many employers and TPAs already provide multiple notices about claim submission deadlines, so compliance with the law may require only small changes to existing notices and communication procedures. For more information, see EBIA’s Cafeteria Plans manual at Section XVII.I (“What State Laws Apply to Cafeteria Plans?”) and EBIA’s Fringe Benefits manual at Section III.L (“What Laws Other Than Code § 137 Apply to Qualified Adoption Assistance Plans?”). See also EBIA’s ERISA Compliance manual at Section XXXIX (“ERISA Preemption of State Laws”).

Contributing Editors: EBIA Staff.

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