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How the Consolidated Appropriations Act Will Affect Your FSA Plan

The Consolidated Appropriations Act was signed into law on December 27, 2020. This is the latest COVID relief bill since the CARES Act in March 2020. This latest bill was designed to extend and amend some of the things originally included in the CARES Act. This includes several provisions that provide relief for Health and Dependent Care Flexible Spending Accounts (FSA’s).

 

Employers may, but are not required to, permit the following:

  • Health and Dependent Care FSA’s: If your Health FSA has a rollover: You may allow a carryover of unused funds, with no dollar limit, from the plan year ending in 2020 into the next and/or from the plan year ending in 2021 into the next plan year;

-OR-

  • Health and Dependent Care FSA’s: If your Health FSA has a grace period: You may allow an extension of the grace period up to 12 months after the end of the plan year, for a plan year ending in 2020 and/or 2021.
  • Health and Dependent Care FSA’s: You may allow employees to change their election on a prospective basis for a plan year ending in 2021 without a qualifying event. Their election may not exceed the IRS maximum or the maximum amount you have chosen to allow employees to elect into. Please note: If you choose this option, take notice to not allow employees to lower their election below the dollar amount of claims they have already been reimbursed for.
  • Health FSA’s: You may allow employees who terminate employment or lose eligibility for the FSA during the calendar year 2020 or 2021 to continue to have access to their FSA funds throughout the entire plan year (and grace period if one is offered). Please note: if you choose this option, terminated employees or those that lost eligibility will have access to their entire election, not just the amount they contributed into the plan.
  • Dependent Care FSA’s: You may temporarily increase the age for which an employee may seek reimbursement for Dependent Care expenses from age 13 to 14 for dependents who reached the limiting age (13) during the pandemic. This would allow the employee to carry forward any unused balance from the prior plan year if the employee had a child who reached the limiting age under the Dependent Care FSA during the last plan year. Such reimbursements are available to employees participating in the Dependent Care FSA for the last plan year for which the enrollment period ended by January 31, 2020 (for most Dependent Care FSA plans, this will be the calendar year 2020 plan year).

Employers are not required to offer the additional provisions and it is up to the employer’s discretion to allow for some or all these provisions.

Is there anything Payroll Systems can help you with as you accommodate rapid legislation changes? Reach out and talk to us about the easy-to-scale solutions you need for your business.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.