On December 27, 2020, the President signed the COVID-19 Relief Bill, which allows for changes to flexible spending accounts. We expect federal agencies to provide further guidance on these changes and we will provide updates as more information is available. Below are details about the applicable provisions of the bill. PEBA is working to provide relief to eligible members as quickly as possible and will update publications accordingly soon.
Medical Spending Account (MSA) and Limited-use Medical Spending Account (Limited-use MSA) carryover
The bill increases the maximum carryover amount for plan years 2020 and 2021 from $550 to the full amount of unused funds.
2020 participants: If you participated in an MSA in 2020, you can carry over the full amount of unused funds remaining after the reimbursement deadline into the 2021 plan year.
2021 participants: If you participate in an MSA in 2021, you can carry over the full amount of unused funds remaining after the reimbursement deadline into the 2022 plan year.
Dependent Care Spending Account (DCSA) grace period
The bill extends the grace period for plan years 2020 and 2021 from March 15 to December 31 of each following year.
2020 participants: If you participated in a DCSA in 2020, you can continue to incur expenses through December 31, 2021, and submit claims for reimbursement using your 2020 funds by March 31, 2022. You will forfeit 2020 funds left in your account after the reimbursement deadline.
2021 participants: If you participate in a DCSA in 2021, you can continue to incur expenses through December 31, 2022, and submit claims for reimbursement using your 2021 funds by March 31, 2023. You will forfeit 2021 funds left in your account after the reimbursement deadline.
DCSA age limit
The bill makes a temporary change to the maximum age limit for eligible dependents in one limited circumstance:
- You must have been enrolled in a DCSA for the 2020 plan year; and
- Your dependent child must have reached age 13 during 2020; and
- You must still have unused 2020 DCSA funds available.
If you meet all of these conditions, you may request reimbursement for any eligible dependent care expenses incurred January 1, 2020, through December 31, 2021, for that child until the child reaches age 14. If you do not meet all of the above conditions, the normal rule applies, which states you can seek reimbursement for eligible dependent care expenses for children until they reached age 13.
Prospective enrollment changes
Based on the provisions in this bill, PEBA is allowing employees to make certain prospective changes to MSAs, Limited-use MSAs and DCSAs without a qualifying change in status in 2021. You can make the following changes to your flexible spending accounts for plan year 2021:
- Make a new MSA, Limited-use MSA or DCSA election up to the maximum contribution limit.
- Increase your current MSA, Limited-use MSA or DCSA election up to the maximum contribution limit.
- Decrease your current MSA, Limited-use MSA or DCSA contributions. The decrease cannot be greater than the amount you have already contributed or been reimbursed. You cannot receive a refund of funds you have already contributed. Additionally, the $2.32 monthly administrative fee will still apply because your account is active.
- Stop future contributions to your MSA, Limited-use MSA or DCSA. You can stop contributions only if you have contributed more than the amount you have been reimbursed. Additionally, the $2.32 monthly administrative fee will still apply because your account is active.
To make a change, you should complete an Active Notice of Election
(NOE) form and return it to your benefits administrator. Indicate “COVID” at the top of the NOE as the change reason. Your change will be effective the first of the month following PEBA receiving a completed NOE, and the change will affect your contributions going forward. You must submit an NOE by November 30, 2021.
If you have questions about the changes allowed under this bill, please contact your benefits administrator.