You are now leaving this website and being directed to the specific California government resource or website that you have requested. CalHR accepts no responsibility for the content or accessibility of external websites or external documents linked to on this website.
Under the Internal Revenue Code (IRC) governing the FlexElect Program, employees who complete a form to enroll in FlexElect during the annual FlexElect Open Enrollment Period have until December 31 of the same year to cancel or change their FlexElect Open Enrollment elections for the next plan year. This rule also applies to employees who are automatically reenrolled in the Cash Option. Accordingly, if employees wish to cancel or change their automatic Cash Option reenrollment after the open enrollment period, they may do so no later than December 31 (prior to the new plan year).
Employees who are not enrolled in the Cash Option and wish to enroll for the next FlexElect Plan Year must complete a STD. 701C during the current FlexElect Open Enrollment Period.
Employees may authorize a monthly deduction to be placed into a MRA to reimburse themselves for eligible medical expenses. The deduction is taken from the employees' paychecks before federal, state, and social security taxes are assessed. The minimum contribution into the account is $10 per month; the annual maximum may vary year to year. Employees who enroll mid-year can still contribute the annual maximum and would not be subject to the monthly maximum. Employees may not request reimbursement from this account to pay for any out-of-pocket premium costs for their medical and/or dental insurance. Employees may reference the FlexElect Handbook which provides a partial list of expenses that are payable under the state's FlexElect MRA.
FlexElect enrollment choices are in effect for the entire plan year, January 1 through December 31. Employees may not change or cancel their FlexElect elections during the plan year, except for permitting events as defined by IRS regulations. IRS regulations also require that any changes/cancellations to FlexElect benefit elections must be necessary and appropriate as a result of the change in status event. Once an election is made (after a newly eligible permitting event), the employee must experience another permitting event to change their election, even if they are still within the 60-day time period.
In general, permitting events include:
IRS Codes stipulate eligible expenses, for purposes of the reimbursement accounts, must be for services/supplies received/purchased between the effective date of participation through December 31 of the same plan year. The effective date of participation is the effective date of enrollment (i.e., January 1 for those enrolling during the Open Enrollment period). If a participant is enrolled in the Medical Reimbursement Account and cancels his/her coverage before December 31, he/she may only submit claims for expenses incurred during the months for which they have contributed.
2020 and 2021 Plan Year Relief under the Consolidated Appropriations Act of 2021 and IRS Notice 2021-15
Employees who canceled their Medical Reimbursement Account in 2020, or will cancel their Medical Reimbursement Accounts in 2021, will be eligible to incur expenses after their cancellation date and through the grace period. In no event will an employee be eligible for reimbursements exceeding the amount they contributed for the plan year. Dependent Care Reimbursement Account participants are already eligible to continue to incur expenses through the grace period. More information can be found under the 2020 and 2021 Employee Relief under the FlexElect Reimbursement Accounts Program.
Employees may get confused about when they can start claiming expenses because even though January 1 is the start of the new plan year, reimbursement account deductions begin with the December pay period paycheck and continue through the following November pay period paycheck. This is because the December wages are dated January 1 (of the following year) and are considered earnings for the next tax year.
Submission of Reimbursement Claim Forms
The last possible date employees may submit claims for reimbursement from their Medical Reimbursement Act (MRA) and/or Dependent Care Reimbursement Act (DCRA) is June 30 of the year following their participation in FlexElect. This means employees have six full months after the plan year has ended to submit their claims for expenses incurred during the plan year for which they were enrolled. If a claim is not postmarked by June 30 (or the next working day if June 30 falls on a weekend or holiday) the claim will not be processed and will be returned to the employee.
The claims filing deadlines will also be extended due to the grace period extensions. These deadlines will be extended to June 30 of the following year. More information can be found under the 2020 and 2021 Employee Relief under the FlexElect Reimbursement Accounts Program.
Reimbursement checks are mailed directly to the employees' homes using address information on file with State Controller's Office (SCO). Direct Deposit became available January 1, 2015, and participants can enroll by going to ASI's website, then click on “Resources," then click on “Forms" and then click on "Paperless Notification & Payment Authorization Form" or click on “Direct Deposit & Email/Text notification" under “Go Green" at the bottom of the page Employees should be reminded to verify the address information on file with SCO through their department and to complete an "Employee Action Request" (EAR) Form (STD. 686) if the address is not correct. The third-party administrator (record keeper) is sent updated address information by SCO twice monthly on the 1st and the 15th. Depending on when the EAR is processed the record keeper will update its address files accordingly.
If the participants' reimbursement account is active on December 31, the IRS rules on deferred compensation allow payment for medical and dependent care expenses incurred up to two and one-half months after the end of the plan year. In other words, employees may use money deducted during one plan year to pay for medical and dependent care expenses incurred up to March 15th of the following year. Employees still have until June 30th of the following year to claim expenses incurred up to March 15th and any unused amount at that time will be forfeited pursuant to IRS Rules.
Claims will be paid in the order in which they are received. If the employee has an account balance in their prior plan year's account, and a claim is received with a date of service during the grace period, the expense will automatically be paid from their prior plan year's account. If a claim is received at a later date, with a date of service in the prior plan year, and all the funds have been paid from their prior plan year account, the claim will not be paid.
For this reason, it is important that the employee file claims in the order expenses are incurred. This will help to assure they maximize the use of their account for both plan years.
If the participant cancels their Dependent Care or Medical Reimbursement Account during the plan year, or if they leave state service or retire and do not continue their MRA deduction via Consolidated Omnibus Budget Reconciliation Act (COBRA), they are not eligible to receive payment for services during the Grace Period (through March 15 of the following year).
The grace period will be extended under the 2020 and 2021 plan years for both the Medical Reimbursement Accounts and Dependent Care Reimbursement Accounts until December 31 of the following year. This will allow employees to continue to incur expenses and utilize funds remaining in their accounts. More information can be found under the 2020 and 2021 Employee Relief under the FlexElect Reimbursement Accounts Program.
IRS regulations require the state to make the full annual contribution amount available from the Medical Reimbursement Account. As a result, employees who incur eligible medical expenses can be reimbursed at any time during the plan year based on their annual contribution amount even though all of their monthly payroll deductions have not been taken.
For example, an employee enrolls in FlexElect and authorizes a monthly deduction of $100 (annual contribution of $1,200) into an MRA. This employee could incur an eligible expense in the amount of $2,000 in March, and submit a claim form along with a copy of the receipt for the $2,000 medical expense. The State would be required to pay the employee $1,200 (the annual maximum contribution) in March regardless of the fact the employee had only contributed $300 into his/her account (deductions from the December, January, and February pay period paychecks at $100 per month). The remaining deductions (March through November pay periods) would basically pay back his/her MRA.
Dependent Care Reimbursement Account
Unlike the Medical Reimbursement Account, the funds must be deposited in the participant's account and the service period has to have passed before the Dependent Care Reimbursement Account claims can be paid.
If employees do not elect to reenroll in the FlexElect Program for the next Plan Year and do not wish to make any changes to their medical and/or dental insurance, they will not be required to complete a HBD-12 and/or STD. 692 to continue their traditional medical and dental insurance at their current level of benefits.
Employees who were enrolled in the Cash Option and do not want to be automatically reenrolled will need to cancel their enrollment. In addition, in order to obtain State-sponsored benefits they MUST reenroll in a medical and/or dental insurance plan.
Reenrollment into traditional health and/or dental is NOT automatic for Cash Option participants who elect to cancel their enrollment. Completion of the HBD-12/STD. 692 forms are required. In this instance, they should follow the instructions on page 32.
If employees do not wish to reenroll in the FlexElect Program for the next plan year and wish to make changes to their medical and/or dental insurance, they MUST complete a HBD-12 and/or STD. 692 reflecting the changes. The HBD-12 should be sent to CalPERS for processing and the STD. 692 should be sent to the SCO for processing.
Following are some examples of different scenarios of FlexElect options employees may choose. Please keep in mind these are examples to help illustrate what form(s) should be completed. With every different situation, the form(s) will be completed differently.
Each example begins with an explanation of the employee's current status, their desired FlexElect elections, and the actions required by the employee, their spouse or domestic partner, and the department.
In all examples, the "employee" is the State employee and is the principal figure in the scenario. The "employee's spouse or domestic partner" may be a State employee or may be employed by private industry.
The information/examples in this manual does not reflect every possible type of enrollment/change within FlexElect but hopefully provide a broad range of enrollment and change situations.
Please visit our FlexElect
Frequently Asked Question page.