Special FSA Rules – Consolidated Appropriations Act

President Trump signed the Consolidated Appropriations Act of 2021 into law on Dec. 27, 2020. The Act provides temporary special rules for health and dependent care flexible spending accounts (FSAs) that give employees additional time to use these funds.

Extended Periods

Because of the COVID-19 pandemic, employees may be more likely to have unused amounts in health or dependent care FSAs. For plan years ending in 2020 and 2021, the Act allows employers to:

• Permit employees to carry over unused amounts remaining in these FSAs to the next plan year.
• Extend the grace period to 12 months after the end of such plan year.
• Permit employees who cease plan participation during 2020 or 2021 to continue to receive reimbursements from unused amounts through the end of the plan year in which their participation ended.

The Act also includes a special carry forward rule for dependent care FSAs where the dependent aged out during the pandemic. For purposes of determining dependent care assistance that may be paid or reimbursed, the maximum age is increased from 13 to 14 years of age.

Change in Elections Amounts

Employees are also able to elect to prospectively modify the amount of their FSA contributions for plan years ending in 2021, even if they have not experienced a change in status. However, the applicable dollar limitations will continue to apply.

FSA Carry Forward Ramifications

Important - Prior to making a change that carries unused FSA amounts forward: If your medical plan offerings include a high deductible health plan option with an HSA account, contact your current employee benefits broker to discuss ramifications of the carry forward feature, as this does extend the FSA plan year.

If you have questions related to this update, please contact your North Risk Partners advisor. Don’t have an advisor? No problem. We’ll help you find one.

This regulatory update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

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