DataPath, Inc. is pleased to announce that our FSA/DCAP grace period solution will be available on or before October 1, 2005, for licensees of our DPI-125 system.

This update is in response to IRS Notice 2005-42 allowing the deadline for incurring FSA and DCAP expenses to be extended for up to 2 ½ months after the end of the plan year. Medical expenses incurred during this period can be reimbursed from funds remaining in the accounts at the end of the Plan Year. (Click here to read previous newsletter article giving the details.)

This groundbreaking ruling will have far-reaching ripple effects throughout the benefit administration industry, and our programmers have been working diligently to provide you a comprehensive and flexible solution. (Click here to read previous newsletter article on the administrative challenges resulting from the Notice.)

After considering all the ramifications and conducting a survey to find out what you wanted , we redesigned the DPI-125 system in a way to empower you with as many options and as much flexibility as possible.

Highlights of the modification include:

• You can apply the new extended grace period to both Flexible Spending Accounts (FSAs) and Dependent Care Assistance Programs (DCAPs).

• You can select whether or not to apply a grace period for each FSA or DCAP and, if a grace period is applied, you then have the following choices:
  
• You can elect the standard 2½ month Grace Period or you can customize the length of the Grace Period.
  
• You can allow the entire previous year's balance to be used in the Grace Period or you can allow a cap to be set on the amount that can be used.

• You will also have the flexibility to vary the length of the Run-Out period for each FSA or DCAP Benefit.

• The Participant will not be required to elect the benefit for the following year. The participant can still be eligible for the Grace Period regardless of a decision to participateor not participate in the FSA or DCAP the next year. The only requirement is that the individual is a participant on the last day of the Plan Year.

• The system provides real-time individual claim item re-alignment to allow the reimbursement during the grace period to come from either the previous year's funds or the current year's funds.

• You will have the option to allow debit/credit card swipes for reimbursement of claims during the Grace Period. (Our market research has determined that most, if not all, of the other debit card processors will not coordinate the rollover funds and the current plan year funds. The competitive advantage this functionality provides you is enormous.)

How does it work?

When a claim is entered, the following actions will take place as part of the Claims Entry Routine:

• If eligible under the employer's plan design, the user will be notified that the claim entered can be applied to the prior plan year.

• The user will be asked which plan year to apply the claim against.

• If the claim exceeds the amount from the previous year, the system will help the user to split the claim between plan years.

• If (1) a claim for expenses incurred during the grace period has been reimbursed from the previous year's funds and (2) a subsequent claim is received for expenses incurred during the previous year, the user can easily reassign the first claim from the prior plan year to the current plan year.

Our programmers' goal in redesigning DPI-125 was to give you a robust and service-packed § 125 solution, and they succeeded. You can differentiate yourself in the marketplace by offering your clients options in administering this new grace period, while other administrators can only offer them one standard method—take it or leave it.

Watch this newsletter for more news and updates.