News
President Bush signs law allowing FSA cash outs for Military Persons
The Heroes Earnings Assistance and Relief Tax Act of 2008, or HEART Act, includes a provision allowing employees who are participating in a Medical FSA to receive a cash out of their contributions when they are called for active duty. This new law is not mandatory. The statute provides protection that the Plan will not be disqualified for allowing these limited cash outs.
As a Plan Sponsor, you will need to decide whether you will allow these distributions. If you elect to deny such distributions then there is no action needed by you or your Plan.
HFS can provide a plan amendment and Summary of Material Modification for clients who elect to include this new distribution term in their medical FSA. Contact HFS Sales to obtain these forms.
Once you have added this term to your plan, then HFS will process the distributions on your behalf. When an employee requests a distribution under these rules, you will need to send a written request to HFS, directing HFS to send the participant the remaining balance in their medical FSA plan. An email to your account representative will be sufficient. The balance is limited to the payroll deductions made as of the date of the request less amounts paid for valid claims. HFS will terminate the coverage, send the distribution to the employee, and zero out the account.