United States 

Office of 

Personnel Management 

The Federal Government’s Human Resources Agency 

Benefits Administration Letter 

Number: 03-801 Date: April 25, 2003 

Subject: Federal FSA Program: Information for Agency Human Resources Staff 

As we hope you’ve heard by now, OPM has awarded a contract to SHPS, based in Louisville, 

Kentucky, to serve as administrator of the new Federal FSA Program. SHPS, one of the largest FSA 

administrators has the experience and resources to handle a major account such as ours. We have been 

actively working with SHPS to meet our July 1 implementation date. Since being able to deduct 

allotments from pay is the essential ingredient to this program, we’ve been focused for the past several 

weeks on working with agency payroll providers. Now we’d like to share with you some information 

you’ll find helpful in the coming weeks. 

Eligible Employees 

Employees whose appointment conveys eligibility for FEHB coverage may elect to enroll in the health 

care FSA upon entering on duty. All employees with qualified dependents may elect to enroll in the 

dependent care FSA except temporary employees with no fixed work schedule (when actually 

employed/WAE) whose tour of duty is six months or less. 

Effective Date 

The initial plan year for the FSA program begins July 1 and will end December 31, 2003. Employees 

who make and election, and whose payroll provider is able to deduct the allotments will be 

eligible to receive reimbursement for covered expenses incurred on or after July 1. Many payroll 

systems have reported that they’ll be ready. We are working very hard with all payroll systems to 

answer questions, address concerns, and make the process of deducting allotments as easy as possible. 

We have confirmation these payroll providers will be ready to begin deducting FSA allotments July 1st: 

CIA Department of Labor 

DHS National Finance Center 

DOI/NBC Nuclear Regulatory Commission 

EPA Railroad Retirement Board 

FBI State Department 

GSA U.S. Senate 

HHS U.S. Tax Court 

Interior 
 

 

 

 

If your agency payroll provider is not listed here, we have not received confirmation that they will be 

ready. You may wish to contact your servicing payroll office to determine when the program will be 

available to you. 

Open Season for Initial FSA Plan Year 

Open Season for the Initial FSA Plan Year will begin May 19th and end June 20th. During this time, 

employees can elect to enroll in the healthcare FSA (HCFSA) and/or a dependent care FSA 

(DCFSA). For the HCFSA, employees may elect a maximum of $3,000 per plan year. For the 

DCFSA, an annual maximum of $5,000 may be elected. For both benefits, the minimum election must 

be $250. No other benefit elections can be made during this time. 

SHPS has a dedicated toll-free number for Federal employees: 1-877-FSAFEDS (372-3337). Please 

note that this number will not be staffed by customer service representatives until May 19th. Beginning 

that day, customer service representatives will be available from 9 AM until 9 PM Eastern Time, 

Monday through Friday to answer questions, and assist employees who wish to enroll via the phone. 

There will not be any educational/enrollment campaign for the Initial FSA Plan Year Open Season. 

Like the Long Term Care Program, the Open Season that begins May 19th is geared towards 

employees who are already familiar with the benefits and risks of an FSA and are ready to make an 

election. 

Enrollment 

There are two ways to enroll during the first open season. First, SHPS is enhancing their very good 

electronic enrollment system specifically for our program. The enrollment system will let employees 

know which FSA they are eligible to elect, and Web-based enrollment at www.fsafeds.com will be 

available 24/7. Employees may also call the toll-free number 

(1-877-FSAFEDS [372-3337]) and a SHPS customer service representative will complete the 

enrollment interactively with the employee. 

Eligible Expenses 

In order for an expense to be eligible for reimbursement under an FSA, the expense must be incurred 

during the plan year. For 2003, the plan year begins July 1 for employees whose FSA allotments begin 

in July. 

HCFSA 

Expenses that are: 

•	 tax-deductible; 

•	 related to the diagnosis, treatment or cure of a medical condition, mitigation or prevention of 

disease that affects any part or function of the body; 

•	 are primarily to alleviate or prevent a physical or mental defect or illness; 

•	 are not reimbursed by FEHB or any other source; and 

• are incurred by you and/or any dependent you claim on your federal income tax return 

may be reimbursed under a health care FSA. 

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Insurance premiums of any kind—non-FEHB coverage, Medicare Part B, Tricare, etc., do not qualify 

for reimbursement. FEHB premiums are already deducted pre-tax through premium conversion. 

DCFSA 

If a family member is: 

• under age 13; and/or <-- Corrected 5/20/03 

• a person of any age whom you claim as a dependent on your federal income tax return; 

• mentally or physically incapable of caring for himself or herself; and 

• the care is necessary to allow your employee and if married, his or her spouse to work 

then the dependent care expenses for that family member may be reimbursed 

Program/Account Costs 

There are no government funds available to implement or administer this program. Most employers 

cover ongoing administrative expenses by using the savings they accrue on employer FICA taxes they 

don’t have to pay since income is reduced for those employees who participate in pre-tax benefits such 

as premium conversion and FSAs. At this time, we have no mechanism for agencies to forward their 

FICA savings to SHPS to cover the administrative costs for their employees. Therefore, administrative 

costs will be covered by participants paying a monthly fee per account. For the HCFSA, the fee is $4 

for every month you participate. For the DCFSA, the fee equals 1.5% of the entire amount you elect. 

In both cases, SHPS will compute the amount due for the plan year and deduct the fee from an 

employee’s first claim for reimbursement of a covered expense. We hope to work with you in the 

future to eliminate any employee cost to participate. 

Subsequent Open Seasons 

The FSA open season will coincide each year with the FEHB open season. During that time, 

employees will have the opportunity to elect a HCFSA and/or a DCFSA for the Plan Year which 

begins the next January 1. Open Season for the 2004 plan year will be from November 10 through 

December 8. 

Positive Election Required 

FSAs will require a positive election each and every year. If an employee does not make an election, 

they will not participate in an FSA for the next plan year. This is very different from other benefit 

elections (FEHB, premium conversion, LTC, FEGLI), and we will focus on the required annual election 

during the November-December open season which leads into the first full plan year. 

Qualified Status Changes/Qualifying Life Events 

Qualified Status Changes (QSCs) is an IRS term used to determine if someone who participates in an 

FSA can change their election outside of open season. These QSCs are very similar-and usually 

identical—to the QLEs that you’ve used for premium conversion, and include such events as: 

• Change in Legal Marital Status: marriage, divorce, legal separation, annulment 

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•	 Change in your number of dependents: birth or adoption of a child, youngest dependent aging 

up, etc. 

•	 Change in employment status that affects your eligibility for benefits. 

You will continue to make QLE determinations for premium conversion. SHPS will make QSC 

determinations for FSAs. All changes to elections must be on account of and consistent with the status 

change/life event. 

Role of Agency HR Staff 

Many of you have called or emailed us recently asking for training or information to provide to your 

employees. We appreciate your willingness and eagerness to get information to your employees. We 

are NOT expecting Federal human resources professionals to become flexible spending account experts 

and converse knowledgeably with employees about the rules and requirements of flexible spending 

accounts. That's what SHPS will do. What we will expect is that when employees approach you with a 

question, you know to refer them to the SHPS dedicated toll-free number (1-877-FSAFEDS [372­

3337]), the web site (www.shps.net/fsafeds), published pamphlets, etc. Similar to the LTC Program, 

you will be conduits in directing employees where to go for answers, as opposed to answering their 

questions directly. 

Communication 

We have three ways for you to get up-to-the-minute information on FSAs, and our implementation 

activities. 

ListServ 

OPM has set up an FSA listserv that will be the fastest way to get news and updated 

information. Instructions on how to sign up for the listserv are included at the end of this BAL. 

Web Site 

We are pleased to announce that SHPS has established a dedicated web site for the Federal 

FSA Program. That address is: www.fsafeds.com. Please bookmark it, share it with your 

employees, and visit it often. 

Email Address 

If you have a specific question that is not yet addressed on the web site, you may send SHPS 

an email at fsafeds@shps.net. 

A tri-fold brochure which provides some overview information on the Federal FSA Program will soon 

be ready, and available on the web site for download. You may reproduce this brochure for your 

employees. 

Benefits Officer Meeting 

The Benefits Officers Training and Development Group has scheduled another meeting on FSAs on 

April 28, 2003 from 10 AM until noon in the OPM auditorium. SHPS will be at that meeting to present 

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an overview and answer your questions. 

2003 Benefits Officer Conference 

FSAs will be a hot topic at June’s Benefits Officer conference in Greensboro, North Carolina. SHPS 

will be an active participant in both the Plenary Session as well as during breakout sessions scheduled 

for June 4th and 5th. They will also have a booth set up to answer your specific questions throughout the 

conference. 

Payroll Providers 

Many agencies contract out payroll services to one of the major payroll providers. Other agencies have 

their own payroll systems, some of which will be transitioned to one of the four e-Payroll providers over 

the next 18 months. SHPS is currently contacting each agency payroll provider to work out specific file 

transfer details. If you have your own payroll system, and your payroll office has not yet heard from a 

SHPS representative, please ask them to contact Laurie Bodenheimer at 202-606-1413, or 

lrbodenh@opm.gov. 

Adopting Agencies 

Back in the summer of 2000, agencies not part of the Executive Branch were offered the opportunity to 

"adopt" FedFlex, OPM's plan (if they did not have their own premium conversion plan). Since FedFlex 

is now being expanded to include FSAs, those agencies will be contacted and offered the opportunity to 

add FSAs under our plan. If you are not sure if your agency needs to adopt FedFlex, please contact 

Laurie Bodenheimer (see above). 

We look forward to working with you to implement this exciting (and much anticipated) new benefit for 

Federal employees. 

Frank D. Titus 

Assistant Director 

 for Insurance Services 

Attachment 

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--

Attachment to BAL 03-801 

How to Subscribe to the New FSAInfo Listserv 

1. Send an email to listserv@listserv.opm.gov 

a. Put whatever you want in the subject line of your email. The subject is not used in the 

subscription process.
 

b. In the BODY of the message type: 

SUBSCRIBE FSAINFO firstname lastname, substituting your own first and last names. 

c. Skip a line and add two dashes (--)
 

d. Do not put anything else in the body of the email.
 

Here’s an example:
 

SUBSCRIBE FSAINFO Laurie Bodenheimer
 

e. The computer stores the email address that you used to send the message as the email 

address that you wish to receive the listserv emails. So if your outgoing email address is 

different from the address you want to receive the incoming email, you cannot subscribe this 

way. Instead you must send an email to Laurie Bodenheimer at lrbodenh@opm.gov and 

explain the problem. She can add you to the list manually. 

2. You should receive a CONFIRMATION email soon after sending your SUBSCRIBE email. If 

you do not, then there is something wrong with your outgoing email message. Please doublecheck that you followed the instructions exactly. If you continue to have problems, please email 

Laurie Bodenheimer at lrbodenh@opm.gov. 

3. Follow the instructions in the Confirmation email reply exactly. You will not be subscribed to 

the listserv until you reply to the Confirmation email as stated in that message. The 

Confirmation email will also contain instructions on how to cancel your subscription. 

4. Encourage other human resources professionals to subscribe. This listserv will operate well into 

2004, so please make sure that new HR personnel subscribe when they come onboard. We 

need your support to make this work! 

If you have any questions, please call Ms. Bodenheimer at 202/606.1413. 

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