Policy gears Although the provisions of California’s new FSA law are fairly brief, it is fairly vague and raises significant questions about how to comply. (Photo: Shutterstock)

Employers generally look to federal regulations for guidance on how to design, administer and maintain compliant flexible spending account (FSA) plans for their employees. Traditionally, this tax favored account-based benefit has been regulated by the U.S. Department of Labor and the Internal Revenue Service.

Thanks to the passage of recent state legislation, employers who sponsor FSA benefits in the state of California now have additional notice requirements to contend with. Although this new law has well-meaning intentions, it does appear to impose additional compliance concerns as well as directly conflict with the Employee Retirement Income Security Act (ERISA). As this law went into effect on January 1, 2020, many employer sponsors wonder whether this new law is even enforceable.

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