The Consolidated Appropriations Act of 2021 (also called the COVID-19 relief bill) includes temporary provisions that allow employers to provide for a carryover of unused health flexible spending arrangements (FSA) and dependent care assistance flexible spending arrangements (DCAP) funds from 2020 to 2021 and from 2021 to 2022. The legislation also permits more expansive FSA and DCAP grace periods for plan years ending in 2021 and 2022.
Under the new law, which was passed by both houses of Congress on December 21, 2020 and signed by the President on December 27:
- FSAs and DCAPs can reimburse an individual after they are no longer an active participant in the plan (incorporating a “spend down” provision).
- Employers can raise the last eligible age for children’s dependent care from 13 to 14 for the 2020 plan year.
- Plans can be amended to permit a prospective change in election amounts for health FSAs and DCAPs for plan years ending in 2021 without a corresponding change in status event (similar to IRS Notice 2020-29).
Each of the FSA and DCAP provisions in the Act are not requirements but temporary plan options that a Plan Sponsor may implement for the 2021 & 2022 plan years. A Plan Sponsor can include one, some, or all of these options.
If you would like to implement any or all of the temporary provisions into your FSA or DCAP plans, please email MedBen Director of Administration Sharon A. Mills at firstname.lastname@example.org. Plan amendments are required and must be adopted no later than December 31, 2021. As a side note, the actual amendments do not need to be prepared before the end of the year, just adopted and effective as of that date.
If you would like to discuss the temporary provisions, please call Mills at 740-522-7438.