How to Optimize Salesforce for FSA Grace Periods - Penrod
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How to Optimize Salesforce for FSA Grace Periods

Many employers offer their employees a Flexible Spending Account (FSA) to cover eligible dental, medical and vision costs. These supplemental healthcare accounts initially spanned the standard plan year duration. But the Consolidated Appropriation Act 2021 made significant changes that created both challenges and opportunities for insurance companies and third-party administrators (TPAs).

This detailed guide takes you through the basics of FSA grace periods and how you can optimize your Salesforce system to help members take full advantage of their benefits.


An Overview of FSA Basics

As of 2021, employees can contribute $2,750 to their health FSA. This rule applies to a limited-purpose FSA that restricts participants to vision and dental care services. The FSA can be used in tandem with an HSA (health savings account).

The statute-set dependent care FSA maximum is $5,000 annually per individual or married couples filing jointly. Couples filing separately will pay $2,500 per head. These amounts aren’t adjusted for yearly inflation and are subject to earned income limits.

Typically, dependent or health care FSA funds that lie unspent within the plan year come with an FSA grace period of two and a half months to utilize the remaining funds. This applies to employees enrolled in FSAs that comprise the grace period option.

Participants can also roll over their unused funds (up to $550) at the plan year’s end and still make the maximum contribution for the next plan year. 

Why Should You Offer FSAs?

A healthcare FSA is among the most desirable benefits in an employee benefits package. Financial savings is its primary advantage. Since FSA contributions are untaxed, employers elude the 7.65 percent payroll tax on staff FSA contributions. While an employer group or TPA will bear the burden of maintaining the account, tax savings and forfeitures will offset the small amount.

FSAs also enable your members to enjoy tax savings. They’ll have peace of mind knowing that the entire election amount will cover qualifying claims even before making their total contributions. While you should still encourage members to contribute year-round, emergency funds can be immensely beneficial.

Understanding FSA Grace Periods

An FSA grace period gives participants added time to cover their FSA-eligible costs beyond the plan year’s conclusion date. It applies to department care and medical FSA.

Employers can allow a maximum of two and a half months’ grace period. With the grace period included, the plan year extends to 14 months and 15 days instead of the actual 12-month plan. For instance, employees whose plan year ran from January 1st, 2021 to December 31st can incur the eligible expense for their plan year to March 15th, 2022.

Any claim they submit during this period will automatically deduct from the previous year’s remaining amount before drawing from the new plan year. 

Under the May 2020 IRS guidance, plan sponsors could allow midyear contribution changes from dependent and health care FSA and increase the permitted carryover limit through the conclusion of 2020.

The Consolidated Appropriation Act (CAA) 2021 prolonged this relief by introducing the midyear election changes for periods ending in 2021 without qualifying event requirements like childbirth, adoption, marriage, or divorce.

Dependent care and health FSA accounts could be amended under the CAA to offer participants an additional 12-month grace period beyond the plan years ending in 2020 and 2021, notice 2021-15 spells out the CAA’s relief, specifically regarding rollover amount planning.

The guide addresses entities to:

  • Allow dependent care or health care participants to carry over the balances from plan periods that conclude in 2021 to those ending in 2022. An employer may offer neither or either of the carryover extension.
  • Extend the grace period for utilizing the unused amounts for plan years that concluded in 2020 or 2121.
  • Allow workers who last participated in an FSA plan during the end of 2020 or 2021 to continue receiving the unused balances through the plan period that their participation concluded. This includes extended grace periods.

Notice 2021-15 also states that entities may extend the dependent care FSA claims period for dependents who “age-out” by celebrating their 13th birthday during the Coronavirus public health emergency. The age threshold for the 2021 plan year stays at 14, but the relief is only relevant to unspent dependent care FSA funds after the 2020 plan year.

How FSA Grace Periods Work for 2021 and 2022

The FSA experienced significant changes towards the end of 2020. This was part of the CAA 2021. Part of these changes allowed workers to enjoy extended FSA grace periods.

Those whose plans include the FSA grace period extension and their plan year concludes on 31st December have a 15th March deadline. However, the CAA 2021 allows them to prolong this grace period by up to a year (12 months) from their deadlines.

Notably, this extension is at the employer’s discretion, and the charges are temporary. They expire after the 2022 plan year. Afterward, the period will revert to two and a half months.

Grace Period vs. Carryover Provision

You can offer a carryover provision or grace period for FSAs, but never both. A carryover provision lets the worker carry over a certain amount to the next plan year, and there’s no time limit for usage. In 2021, the amount was $550 but increased by $20 in 2022 to reach $570. However, both options had a maximum annual contribution limit of $2,750 in 2021. This increases to $2,850 in 2022.

Employees have until 15th March to incur eligible expenses, but they can submit claims for reimbursement until 31st March. The 16-day window is called the run-out period. Once it expires, any unused money will be forfeited.

Using Salesforce CRM to Drive Profits During The FSA Grace Period

Profit maximization goes beyond increasing sales. You must go above and beyond to identify ways to boost efficiency, minimize oversight, and maximize productivity–all while focusing on the big picture of an employer group’s objectives and mission.

Salesforce has helped insurance companies and TPAs manage their marketing, sales, commerce, member support, and analytics. The platform can simplify operations management, streamline processes, increase efficiency, and drive profit.

It does so in the following ways:

  • Automation – Time is money, and nothing can be more accurate in insurance. Salesforce offers your business the bang for the buck by automating repetitive and intricate processes and completing tasks with minimal effort. For instance, you can automate messages to both employers and employees regarding rollover periods.
  • Personalization – Salesforce Einstein offers deep member personalization. You’ll uncover actionable insights and constantly reevaluate your clients, understand their unique needs, and provide personalized solutions to their concerns. For instance, you can offer value-added suggestions that show members eligible healthcare items they may find useful.
  • Flexibility and control – The two go hand in hand. You can’t grow in a box, and the solutions you choose to achieve your objectives should let you grow flexibly to meet your company’s evolving needs. Salesforce uses a fully customizable structure that offers seamless business environment flexibility to boost your processes and workflow.
  • Reporting and analytics – The platform’s rich analytics allows you to explore data and gain insights to transform your business. It’s almost impossible for your staff to identify and analyze every trend through manual data exploration. Fortunately, the platform simplifies the sales pipeline dashboard.
  • Improved communication – You’ll get a diverse network of partners, resellers, distributors, customers, and staff in the Salesforce community cloud. This enhances collaboration opportunities to boost productivity and sales.
  • Integrations – When vital health records are isolated in different systems like CRM, ERP, or accounting software, you’ll lose productivity and profits. But the platform’s extensive integration options place the vastly spread data in one system to boost data security, save time, and cut costs. The widely integrated system can be a holistic resource for your teams by integrating various software and apps to streamline your business.

Optimizing Your Salesforce Grace Periods

Change can feel overwhelming, but you’re not alone. Below are the practical tips for optimizing your salesforce for FSA grace periods.

Create Flexible Approval Processes

Approvals are among the leading causes of frustration and lost profit, so you must work on yours if you intend to optimize your salesforce for the FSA grace period. A flexible approval process for FSA-eligible expenses can be a significant boost to your overall profitability. The approach cuts time wastage and boosts customer experience. 

Leverage Salesforce Analytics

Salesforce analytics can enable effective salesforce management. Organizations can understand the potential client segments and address their needs appropriately. Moreover, they help you identify new opportunities for revenue generation and growth.

Collect and Manage Data Throughout the Year

Your clients expect high-quality service, but a messy Salesforce database filled with duplicates and inconsistencies compromises this. since new records are added to the CRM every day, you need a proactive approach to data management operating daily. This way, you’ll achieve a standard and reliable client database. This can effectively streamline processes. 

Understand Salesforce Key Performing Indicators Well

Salesforce KPIs are the measurable performance metrics that monitor, evaluate, and optimize the CRM and every relevant sales process. These metrics also help your sales and marketing teams prioritize leads and resources. Crucial KPIs and metrics include:

  • Follow-Up Contract Rate
  • Lead Response Time
  • Pipeline Value Forecast
  • Average Contract Value
  • Average Sales Cycle Length
  • Annual Contractual Value 

Reevaluate Your Communication Channels

You need an excellent communication channel between your sales team to enhance your CRM’s effectiveness. You can boost your sales strategy and operations by understanding expectations and the scheduled delivery time. Defining delivery timelines can significantly increase your customer experience. 

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