Temporary Rules Issued for Health and Dependent Care FSAs

2 minute read

Congress recently passed the Consolidated Appropriations Act of 2021 which is expected to be signed into law by President Trump. It includes temporary special rules to allow employers who offer a health or dependent care flexible spending accounts (FSAs) to provide employees with more time to use the funds.

For plans ending in 2020 and 2021, the Act allows employers to:

• Allow employee to carry over unused amounts remaining in their FSAs to the next plan year
• Extend the grace period to 12 months
• Let employees who cease plan participation during 2020 or 2021 to continue to receive reimbursements from unused amounts through the end of the plan year in which their participation ended

The Act also included special carry forward rules for dependent care FSAs where the dependent aged out during the pandemic. To determine if dependent care assistance may be paid or reimbursed, the maximum age was increase from 13 to 14.

Employees can elect to prospectively modify their FSA contributions for plan years ending in 2021 if they don’t have a change in status. The applicable dollar limitations will continue to apply.

Employers can retroactively adopt plan amendments incorporating these provisions if these specific requirements are met:

• Plan must be operated consistently with the amendment terms until the amendment is adopted.
• The amendment must be adopted by the last day of the first calendar year following the plan year in which it is effective.

Download the bulletin for more details.

This blog is intended to be a compilation of information and resources pulled from federal, state, and local agencies. This is not intended to be legal advice. For up to the minute information and guidance on COVID-19, please follow the guidelines of the Centers for Disease Control and Prevention (CDC) and your local health organizations.