New Flexible Spending Account Changes in Stimulus Bill

Posted by BAS - 22 December, 2020

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The Stimulus Bill (Consolidated Appropriations Act of 2021) passed by the U.S. Senate and House of Representatives on December 21, 2020 gives flexible spending account (FSA) plans the ability to make temporary plan design changes to give employees more control over their FSA benefits. The Bill was signed into law on December 27, 2020.

If you are a BAS flexible spending account plan client, BAS will be prepared to support the options you wish to implement. We will follow up with you and provide detailed instructions on how to inform BAS of your plan design changes (if any).

The permissive changes include: 

  • Increased Carryover for 2020. Dependent Care FSAs and Health Care FSAs with a plan year ending in 2020 may be amended to allow a carryover of all unused contributions into the 2021 plan year.
  • Increased Carryover for 2021. Dependent Care FSAs and Health Care FSAs with a plan year ending in 2021 may be amended to allow a carryover of all unused contributions into the 2022 plan year.
  • Extended Grace Period. Dependent Care FSAs and Health Care FSAs with a plan year ending in 2020 or 2021 may extend a grace period to 12 months following the end of the plan year (an increase from 2-1/2 months).
  • Post-Termination Benefits. Dependent Care FSAs and Health Care FSAs may allow post-termination benefits so an employee who stops participating in the plan mid-year in 2020 or 2021 may continue to get reimbursed from unused contributions through the end of the plan year in which participation ceased (and any grace period).
  • Carryforward for Aged-Out Dependents. Dependent Care FSAs may replace “Age 14” for “Age 13” as the maximum age for a qualifying dependent for those who aged out during the pandemic. The change is permitted only if the employee was enrolled in the Dependent Care FSA in a plan year with an enrollment period on or before January 31, 2020, the employee had a dependent who turned age 13 during the plan year, and the employee had an unused balance for the plan year. The reimbursement in the subsequent plan year for the Age 14 dependent is limited to the unused contributions from the prior year.
  • Mid-Year Election Changes. For plan years ending in 2021, employees may prospectively change their Dependent Care FSA and/or Health Care FSA contributions for any reason without experiencing a change in status event.

An employer adopting any of the permissive changes must amend the flexible spending account plan by the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective.

If you are a BAS client, please look for a follow up communication with instructions on implementing these potential FSA changes.

Topics: Covid, coronavirus resources, Flexible Spending Accounts, HR & Benefits


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