Consolidated Appropriations Act, 2021
On December 27, 2020, the latest COVID relief bill, the Consolidated Appropriations Act, 2021, was signed into law. The law includes several provisions that provide relief for health and dependent care flexible spending accounts. Employers may, but are not required to, permit the following:
- Carryover of unused funds, with no dollar limit, from a plan year ending in 2020 and/or 2021 to a plan year ending in 2021 and/or 2022; or
- Extension of the grace period to up to 12 months after the end of the plan year for a plan year ending in 2020 and/or 2021.
The above applies to both health and dependent care FSAs.
- Employees who cease participation in a health FSA during calendar year 2020 or 2021 may continue to receive reimbursements from unused benefits or contributions for claims incurred through the end of the plan year in which such participation ceased (including a grace period if applicable).
- Increase the maximum age (by one year) for certain dependent care beneficiaries who aged out during 2020 and provide additional relief for such dependent care beneficiaries in 2022. • Prospective modification of election amount for health and dependent care FSAs for a plan year ending in 2021.
As stated above, these provisions are not mandates but are options for employers to consider. Plan amendments must be made by the end of the first calendar year beginning after the end of the plan year in which the amendment is effective (for example, calendar 2020 plan amendments must be adopted on or before December 31, 2021), provided the plan must be operated consistent with the terms of the amendment beginning on its effective date.
Administering These Changes
The changes announced by the IRS this week are easily handled by Pro-Flex’s current software system. Enrollment and election changes and terminations can be processed using all the methods accepted in the past, including updating existing elections through the Pro-Flex Plan Sponsor Portal.
Carryover and grace period options on the Healthcare FSA and Dependent Care FSA plans will be carried through to the Pro-Flex Benefit Card and will be managed seamlessly in our software system should you choose to extend either offering to your employees.
Next Steps
If you are interested in allowing for the carryover of unused funds or extending the grace period for filing claims as outlined in the Consolidated Appropriations Act, or if you have specific questions regarding your benefit offerings, please contact your Pro-Flex Benefit Administrator or email us at enroll@proflextpa.com.
The above information is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel.
