United States 

Office of 

Personnel Management 

The Federal Government’s Human Resources Agency 

Benefits Administration Letter 

Number: 03-804 Date: June 16, 2003 

Subject: Enrollments Begin for the Federal FSA Program 

We are very pleased to let you know that the Federal Flexible Spending Account Program (FSAFEDS) 

will begin accepting enrollments on June 16, 2003 and the Open Season has been extended 

through June 27. This will allow employees more time to enroll without delaying the July 1 effective 

date for employees of agencies that can begin deducting allotments in July. Sykes Health Plan Services 

(SHPS), our Flexible Spending Account (FSA) Administrator, is currently working with each payroll 

provider to discuss how this extended enrollment opportunity may affect the timing of the first allotments 

from pay. 

FSA Administrative Fees 

As you know, we delayed accepting enrollments while we considered whether agencies had the 

authority to pay the negotiated administrative fees on behalf of their employees ($4 per month per 

participant for a health care FSA (HCFSA); 1.5% of the annual allotment per participant for a 

dependent care FSA (DCFSA)). Consistent with previous long-term plans for the program, the Office 

of Personnel Management (OPM) explored source funding for administrative fees for the 2004 plan 

year. However, recent events in the federal community gave us the opportunity to advance our 

examination of agencies’ authority to pay fees on behalf of their employees. 

Under FSAFEDS your agency will not contribute towards FICA and Medicare taxes on allotments that 

your employees make to a HCFSA and a DCFSA. The issue was whether agencies could use these 

savings to pay employee administrative fees. OPM and OMB have concluded that, assuming no 

specific constraint in a particular agency’s authorizing or funding statute, agencies may use these savings 

to pay administrative fees for employees. 

On June 13, 2003, our Director, Kay Coles James, sent a memorandum (attached) to heads of 

departments and agencies urging the payment of fees. It is important that Federal employees be 

allowed to keep their hard-earned money. We strongly encourage you to pay the modest FSAFEDS 

fees on behalf of your employees. It’s the right thing to do. You may wish to note that our analysis has 

shown that even after paying fees, agencies will still accrue savings. However, the decision is up to each 

individual employing agency. 
 

 

 

 

We need to know your agency’s decision regarding payment of fees by June 27. You must 

respond. Please email your response to Laurie Bodenheimer at lrbodenh@opm.gov . In the 

meantime, so as not to delay enrollment any further, employees will receive the following message as 

they enroll: 

I understand that my agency has been offered the opportunity to pay my administrative fees. 

If my agency chooses not to cover these fees, I also understand that I am personally 

responsible for payment of administrative fees, and that the annual fee amount for my 

FSA(s) will be deducted in its entirety, from my available account balance, at the beginning 

of the Plan Year. 

We will forward specific information on billing and payment procedures in a separate BAL shortly. 

Web Site Updates 

In anticipation of enrollments, we’ve added some important new information to the FSAFEDS web site. 

 This includes a new brochure and links to the IRS web site defining eligible medical expenses (Section 

213(d)), and featuring a full list of IRS designated expenses that may be eligible for reimbursement 

under a HCFSA; a document listing the Qualified Status Changes (QSCs) that will permit employees to 

change their election during the plan year, and a QSC form that employees can download. There are 

also “Frequently Asked Questions” that will be beneficial in educating employees on the Program. 

Please encourage your employees to review this information prior to enrolling. Employees will be able 

to review, modify or cancel their elections through June 27, 2003. 

Enrollment System 

As you know, when individuals enrolled in the Long Term Care Insurance Program, they needed to 

have a copy of a leave and earnings statement, and were required to manually enter their payroll office 

number (PON) in order to complete an enrollment. We continue to experience problems caused by 

input errors on the part of employees. Based on strong feedback from LTC Partners, SHPS (our FSA 

contractor), and OPM have simplified the enrollment process by having employees select their 

employing agency, with the correct PON being pulled in from a table. We’ve been successful....to a 

point. Employees of some agencies that are payrolled by the National Finance Center (NFC) and some 

that are payrolled by the Defense Finance and Accounting System (DFAS) will need to have a leave 

and earnings statement available in order to complete the enrollment but the majority of employees will 

not. We hope to eliminate the need to know payroll provider identifying information in time for the Fall 

2003 Open Season. 

There are a number of employees, principally those serviced by the DFAS, whose FSA effective date 

will be September 1 because September is the first month in which their servicing payroll office is 

prepared to execute FSA allotments. All employees who wish to participate during calendar year 

2003 must enroll by June 27, 2003, except those who are eligible for Belated Enrollment. 

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Belated Enrollments 

Absentee Belated Enrollments will be accepted by SHPS for employees unable to enroll during the 

Open Season for reasons outside of their control. Employees who wish to make a belated enrollment 

due to extenuating circumstances will need to complete the affidavit/enrollment form within 30 days of 

return to their duty station, but no later than October 1 of any Plan Year. Since all FSA elections must 

be made prospectively, the belated enrollment is effective the day after the employee’s election has been 

submitted to SHPS and cannot be changed unless the employee experiences a Qualified Status Change. 

Claims for services rendered prior to the enrollment effective date will not be paid. 

Information for Employees 

We are pleased with the number of web site visits and calls placed by Federal employees since May 

19. We also appreciate your feedback on web content and the quality of information and assistance 

you and your employees have received from FSAFEDS Benefit Counselors. Both OPM and SHPS 

want to provide information that is timely, accurate, and meets the needs of your employees. Please 

continue to bring customer service issues to our attention – we can only fix what we know about. 

We’ve included an attachment that we hope you’ll use to let your employees know that FSAFEDS 

enrollments are now being accepted. Please fill in the blanks using agency-specific information. If you 

are payrolled by NFC or DFAS, in order to complete item #1 in the attached information for 

employees, you will need to access the FSA Enrollment System and enter your agency to determine if 

your employees will need a recent copy of their earnings and leave statement to enroll. 

Frank D. Titus 

Assistant Director 

for Insurance Services 

Attachments 

3 
 

 

Attachment 1 Information for Employees 

Good News! The FSAFEDS Program will begin accepting enrollments to participate in a health care 

flexible spending account (FSA) and/or a dependent care FSA beginning June 16, 2003. The Open 

Season has been extended until June 27. 

There are several updates to the FSAFEDS web site that you should review prior to deciding if you 

want to enroll. These include: 

� Detailed information on eligible expenses under a HCFSA 

� A Qualified Status Change (QSC) Guide, which explains the events that may allow you 

to change your election during the plan year. 

� Many new FAQs. 

Employees who wish to make an election to participate in a health care FSA and/or a dependent care 

FSA have two options to complete an enrollment: 

1. Online via the www.FSAFEDS.com web site. 

Click on the link for enrollment. Carefully read the opening page. Since __________ is our 

payroll provider, you may/won’t need to have a recent copy of your earnings and leave 

statement in order to complete the enrollment, or 

2. Call the toll-free number 1-877-FSAFEDS (372-3337). A Benefit Counselor will complete 

the enrollment with you. 

You must provide your social security number to complete an enrollment. This number will only be 

used to ensure that your pro-rated allotments are correctly deducted. As you enroll, you will have the 

option to elect an alternate ID to be used when accessing your account. 

As you know, the FSAFEDS program will charge fees to cover the administrative costs of the program. 

The fees are $4 per participant per month for a health care FSA and 1.5% of the annual allotment for a 

dependent care FSA. OPM has concluded that an agency may have the authority to pay for these fees 

on behalf of its employees. Our agency is in the process of determining whether we will be covering 

administrative fees for you. As soon as we have made a decision, we will let you know. 

4 
 

 KAY COLES JAMES /s/6/13/03

 Director 

 

 Flexible Spending Accounts Open Season 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attachment 2 

MEMORANDUM FOR HEADS OF DEPARTMENTS AND AGENCIES 

FROM: 

Subject: 

I am delighted to let you know that the Federal Flexible Spending Account Program (FSAFEDS) will 

begin accepting enrollments on Monday, June 16 and FSAFEDS Open Season has been extended 

through June 27. This will allow employees more time to examine the benefits of the FSAFEDS 

Program and enroll without delaying the July 1 effective date for employees of agencies that can begin 

deducting allotments in July. 

As you know, we delayed accepting enrollments while we considered whether agencies had the 

authority to pay the negotiated administrative fees on behalf of their employees ($4 per month per 

participant for a health care FSA (HCFSA); 1.5% of the annual allotment per participant for a 

dependent care FSA (DCFSA)). Consistent with previous long-term plans for the program, the Office 

of Personnel Management (OPM) explored source funding for administrative fees for the 2004 plan 

year. However, recent events in the federal community gave us the opportunity to advance our 

examination of agencies’ authority to pay fees on behalf of their employees. 

Under FSAFEDS your agency will not contribute towards FICA and Medicare taxes on allotments that 

your employees make to a HCFSA and a DCFSA. The issue was whether agencies could use these 

savings to pay employee administrative fees. OPM and OMB have concluded that, assuming no 

specific constraint in a particular agency’s authorizing or funding statute, agencies may use these savings 

to pay administrative fees for employees. 

It is important that Federal employees be allowed to keep their hard-earned money. I strongly 

encourage you to pay the modest FSAFEDS fees on behalf of your employees. It’s the right thing to 

do. You may wish to note that our analysis has shown that even after paying fees, agencies will still 

accrue savings. However, the decision is up to each individual employing agency. 

We have sent a separate Benefits Administration Letter to your Benefits Officer with additional 

information on the FSAFEDS Open Season and instructions on notifying OPM by June 27 about your 

fee decision. 

I am so pleased that this valuable benefit will soon be available to Federal employees and their families, 

and look forward to our continued cooperation on this and other important benefits for the Federal 

workforce. 

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