Dependent Care Flexible Spending Accounts let employees set aside a portion of their paycheck on a pre-tax basis to cover qualified dependent care expenses. The American Rescue Plan Act signed into law by President Biden, increases the Dependent Care FSA limit from $5,000 to $10,500 for the 2021 calendar year only. Employers who offer Dependent Care FSAs will have the option to amend their plan to allow employees to capitalize on the increased limit. The amendment can be retroactively applied as long as it is amended on or before the last day of the plan year and the plan is operated consistent to the amendment during the period beginning on the effective date of the amendment and ending on the date the amendment is adopted.
