New Temporary Rules Allow Additional Relief for Health and Dependent Care FSA Participants -
Additional Opportunities to Use Existing Balances

January 6, 2020
Employers Can Allow Employees Additional Opportunities to Use Existing Health Care and Dependent Care Balances
What You Need to Know:

The Consolidated Appropriations Act, 2021 (Appropriations Act), enacted on December 27, 2020, contains temporary rules to provide relief for participants in health flexible spending arrangements (FSAs) and dependent care flexible spending arrangements (DCAPs) in light of the COVID-19 pandemic. The Appropriations Act builds on previously issued Internal Revenue Service (IRS) guidance (IRS Notice 2020-29 and 2020-33), by expanding opportunities to provide relief for employees whose FSA and DCAP elections may have been negatively impacted by the Covid-19 pandemic as follows:

  • Carry Over of All Unused Amounts from plan years ending in 2020 to plan years ending in 2021, and for plan years ending in 2021 to plan years ending in 2022; this includes both health FSAs & DCAPs.

  • Extended Grace Period for unused benefits until 12-months after the end of the plan year - for plan years ending in 2020 and 2021. Employers may also allow participants who ceased contributions in 2020, or terminated in 2020, 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.

  • Extend DCAP Dependent Maximum Eligible Age; the maximum age of eligible dependents for DCAPs can go through age 13 (currently it goes through age 12) for the 2020 plan year and for unused amounts from the 2020 plan year to be carried over into the 2021 plan year.

  • Prospective Midyear Election Changes; allow prospective changes to existing FSA and DCAP elections for plan years ending in 2021 without a corresponding change in status.

Employers may amend their FSAs to take advantage of the flexibility offered by the Appropriations Act, no later than the last day of the first calendar year following the plan year in which it is effective. Thus, if a change takes effect January 1, 2021, the plan will
must be amended no later than December 31, 2022. 

For more details, read our full Advisor here:

Next Steps

FSA providers are currently pulling together all details required for Employers to consider and make elections. Many will be supplying a specific form that must be completed and submitted in order to take advantage of the options available.

  1. Keep an eye out for communications from your FSA provider within the next few weeks. If you do not hear from them, you may want to reach out to them directly. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
  2. If you would like to make changes, you will make your elections and submit the required paperwork; you will need to amend your plan and notify participants accordingly. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
  3. If you do NOT wish to make any changes, make sure you do NOT need to submit any paperwork; some administrators are requiring you to opt-out of desired changes.
QUESTIONS?

Don't forget we are here to help! Contact any member of the Sullivan Benefits Team with your questions.