On December 27, 2020, the President signed the Consolidated Appropriations Act for 2021. This new law provides relief options related to Flexible Spending Accounts (FSAs). Employers can choose to adopt any of these provisions or to keep their plan the same.
Optional provisions include:
- Full carryover of all unused funds for plan years ending in both 2020 and 2021. This is applicable to all health and dependent care FSAs.
- Grace period extension: Increase from 2 ½ months to 12 months for plan years ending in both 2020 and 2021. This is applicable to all health and dependent care FSAs.
- Post termination reimbursements: Terminated employees or employees who choose not to participate in the plan during 2020 or 2021 can spend down unspent balances through the end of the plan year in which they terminate (and through the end of the grace period for that plan year, if applicable). Reimbursements would be limited to unused contributions, similar to a dependent care FSA. This is applicable to all health FSAs.
- Mid-year election changes to FSA elections can continue to be allowed on a prospective basis during plan years ending in 2021 without regard to any change in status requirements. This is applicable to all health and dependent care FSAs.
- A special carryforward for dependent care FSAs, where the age limit for qualifying children may be extended from age 13 to 14 for a plan year. Eligibility requirements apply.
Please contact your broker or account representative if you need detailed information or have questions.
