This Compliance Alert is a summary meant to inform our FSA clients of new options included in the latest stimulus package. We will reach out with a separate email to provide a way for you to inform us which options you may wish to implement.
The Consolidated Appropriations Act of 2021 was signed into law by President Trump on December 27, 2020. The Act includes the following optional relief for FSA Plans:
Carryover Relief: Participants in both Medical and Dependent Care FSAs may carryover ALL unused funds from the plan year ending in 2020 to the plan year ending in 2021, and from the 2021 plan year to the plan year ending in 2022.
Grace Period Relief: A Grace Period for plan years ending in 2020 and 2021 may be extended to 12 months after the end of the plan year.
Relief for Recently Terminated Participants: A Medical FSA plan may permit participants who terminated during the 2020 or 2021 plan year to spend down their unused balances for expenses incurred through the end of the plan year in which the termination occurred, including any grace period (similar to what is and has always been permitted for Dependent Care amounts).
Maximum Age Relief: A 2020 Dependent Care FSA plan may extend the maximum age of eligible dependents from 12 to 13 in order to accommodate participants with unused balances due to a child turning age 13 during 2020.
Relief for Mid-Year Election Changes: Plans may permit a prospective change in election amounts for both Medical and Dependent Care FSAs for plan years ending in 2021 (similar to the provision introduced earlier for 2020 plans in IRS Notice 2020-29) without experiencing a qualified change in status event.
If you choose to adopt any of the 2021 options above, the plan must be amended by December 31, 2022.
You can expect further email communications from GDI to assist you with implementing these new options should you choose to do so. Note that these changes are optional, you are not required to make any changes to your FSA plan.
Client Service Team
Group Dynamic, Inc.