Five tips to Changing a Flexible Spending Account Administrator Mid Plan Year

Published by John Dalmata on August 8, 2019

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While changing Flex Spending Account Administrator’s in the middle of your plan year is not ideal, it is certainly possible.

There are a few challenges to doing this effectively:

You are going to have an unavoidable blackout period for your participants as the claims processing responsibility shifts from your current vendor to your new administrator
Your old and new vendors are not going to coordinate with one another, so you’ll need to plan on collecting claims status and balance information from your incumbent to pass to your new administrator
Communicating the change to your employees may be a delicate issue, as they will need to budget for the blackout period and learn the new vendor’s claims submission process.

Nonetheless, these things are all surmountable challenges, and there are times when the situation warrants the transition.

So what are the tips to changing your Flex Spending Account (FSA) Administrator mid plan year?

1. Select your new administrator before notifying your incumbent vendor

It may seem obvious, but postpone notifying your incumbent vendor of your pending departure until after you’ve selected your new administrator. The new administrator will let you know what they need from you to get your account configured and ready to start receiving claims.

You will want to confirm how the new vendor funds your claims. While some collect a payroll deduction every pay period, others let you hold on to your money and have you fund the claims as they are paid out. This change may impact your cash flow accounting.

You’ll want to check your current agreement for the minimum notice of termination. Also, for your contract with your new administrator, consider having an extended initial term so that your future renewals are in sync with your plan year.

2. If you can, postpone your transition until you are beyond any grace period for prior year claim submissions

While not every plan uses a grace period, which allows participants to submit claims incurred within a prior plan year for a limited time following the plan year, your plan may utilize this practice.

If this is the case, it would be prudent to delay transitioning until your grace period concludes so that your new administrator does not have to recreate the transaction history for the preceding plan year. Delaying your transition until the end of your grace period will also reduce the chances of the same claim being paid twice by both the incumbent and the new administrator.

3. Identify all of the data and information needed by your new administrator to get implemented

If you have enrollment paperwork for participants, you will want to fax that information over to your new administrator.

You will also want to confirm all of the information that your new administrator will need from your incumbent vendor before giving your termination notice.

4. Notify your administrator of your termination date

At this point, you can give your termination notice to your incumbent administrator. When you give notice, you will also want to begin your data offboarding process. Ask to receive files in Excel versus PDF or Text.

Be sure to clarify the cut off date for submitting claims to be paid by the incumbent.

5. Notify your employees of the transition to the new administrator

To avoid unnecessary stress, your initial communication to participants should include:

Date to stop sending claims to the incumbent
Date to start sending claims to the new administrator
The start and end date for any blackout period for claims reimbursement
Submission guidelines for the new administrator (i.e. email, mobile app, desktop, fax, customer service call, etc.), as well as any addresses or phone numbers
Where to direct their questions

It’s important to communicate that while the blackout period will delay the time between their claim submission and reimbursement, this does not mean that they cannot incur a claim during the blackout period. Employees can rest assured there will not be any loss of coverage.