![]() The limiting age remains at 14 for the 2021 plan year, but this relief only applies to dependent care FSA funds that remained unspent at the end of the 2020 plan year. Notice 2021-15 also clarifies that employers may extend the dependent care FSA claims period for a dependent who "ages out" by turning 13 years old during the COVID-19 public health emergency. Allow employees who stopped participating in a health FSA plan during 2020 or 2021 to continue to be reimbursed from unused balances through the end of the plan year in which their participation ended, including any extended grace periods.īlur the lines between a grace period and carryover, as the law allows unlimited carryovers (more than just $550) and up to 12-month grace periods," wrote Mark Holloway, senior vice president and director of compliance services at Lockton Companies, a benefits broker and services firm.Extend to 12 months the grace period for spending unused FSA funds for plan years ending in 2020 or 2021.An employer can choose to provide either, or neither, of these carryover extensions. Allow participants in health care or dependent care FSAs to carry over unused balances from a plan year ending in 2020 to a plan year ending in 2021, and to carry over unused balances from a plan year ending in 2021 to a plan year ending in 2022.The guidance addresses how employers can: Notice 2021-15 clarifies the CAA's relief, specifically with regards to plan rollover amounts. Under the CAA, health and dependent care FSAs also may be amended to give participants a grace period of up to 12 months following the end of plan years ending in 2020 or 2021. The CAA extended this relief, for instance by allowing for midyear health and dependent care FSA election changes for plan years ending in 2021 without the need for a qualifying event, such as marriage, divorce, or the birth or adoption of a child. Guidance issued in May 2020, plan sponsors could allow health and dependent care FSA participants to make midyear contribution changes and increased the carryover limit permitted for health FSAs through the end of 2020. Health FSA plans can elect either the carryover or grace period option but not both. ![]() Health FSAs have an additional option of allowing participants to roll over up to $550 of unused funds at the end of the plan year and still contribute up to the maximum in the next plan year. Typically, health or dependent care FSA funds that are not spent by the employee within the plan year can include a two-and-a-half-month grace period to spend down remaining FSA funds, if employees are enrolled in FSAs that have adopted the grace period option. The American Rescue Plan Act givesĮmployers the option to raise these limits for 2021. "Notice 2021-15 provides details on how these relief provisions will operate."Įmployees can contribute $2,750 to a health FSA, including to a limited-purpose FSA restricted to dental and vision care services, which can be used in tandem with a health savings account (HSA).ĭependent care FSA maximum, which is set by statute and not adjusted annually for inflation, is usually $5,000 a year for individuals or married couples filing jointly, or $2,500 for a married person filing separately, subject to earned income limits. ![]() "The COVID-19-related relief that Congress provided in the Consolidated Appropriations Act, 2020, addressed many of the problems that individuals who contributed to health FSAs or dependent care assistance FSAs were facing, since the pandemic limited opportunities to spend the funds they contributed for their own health care or to pay expenses to care for dependents."Įmployers that want to provide this relief "must make a number of decisions to determine what changes to their FSA plans are needed," Sweetnam said. "The IRS was very responsive to the benefits community in providing this guidance in a timely fashion," said William Sweetnam, legislative and technical director at the Employers Council on Flexible Compensation, which represents sponsors of account-based benefits plans. "As a result of COVID-19, participating employees are more likely to have unused health FSA or dependent care amounts at the end of 20," the IRS announcement said. 18, addresses how to apply the FSA relief provisions in the Taxpayer Certainty and Disaster Relief Act, which was incorporated into the Consolidated Appropriations Act (CAA) signed into law near the end of 2020. Employers can now offer employees participating in health flexible spending accounts (FSAs) and dependent care FSAs greater flexibility for rolling over unused funds through 2022, under new IRS guidance.
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