On December 27th, President Trump signed the end of year package Congress passed December 21, averting a government shutdown. The package includes new guidelines for Flexible Spending Accounts. Employers are allowed, but not required to make the changes listed below.
Run Out extended for participants in Healthcare FSA
- Employees who cease participation in their FSA during calendar year 2020 or 2021 can receive reimbursements through the end of the plan year in which such participation ceased.
2021 and 2022 Carryover Increase*
- Carryover of all unused funds from plan year ending in 2020 to plan year ending in 2021
- Carryover of all unused funds from plan year ending in 2021 to plan year ending in 2022
- This is applicable to BOTH Healthcare and Dependent Care FSA plans
Grace period extension*
- The Grace Period for both 2020 and 2021 may be extended to 12 months following the end of the plan year
- This is applicable to BOTH Healthcare and Dependent Care FSA plans
Dependent Care Age increase for Carryover*
Increase the maximum age for Dependent Care FSA from 13 to 14 when a dependent ages out during the Pandemic
- The employee can continue to receive reimbursements through the end of that year for which the child turns 13
- Remaining funds may carryover to the following year and are available for reimbursement
- The employee my not newly enroll or re-enroll for the new plan year where the child has reached age 13
Midyear election changes 2021*
- Eligible employees as needed, may make a new election, increase or decrease an existing election or revoke their election as it pertains to COVID Relief.
- This relief applies to health FSA, as well as dependent care FSA.
- These midyear election changes are allowed for 2021 plans only, on a prospective basis only and changes allow revision to remaining/future contributions.
- Employees can never reduce their election below what has been paid OR what has been contributed to date. (Employers should not be dispersing funds from the FSA to employees. The only reimbursement should come from IRS eligible expenses.)
- Plans cannot be retroactively changed.
- Employers have significant discretion if they choose to apply this relief.
*Employers May choose which relief to make available (if any).
A summary of the bill’s COVID-19 response provisions is available here.
The text of the whole bill is available here.
