Temporary Special Rules for Health and Dependent Care FSAs

Included in the Stimulus Package passed by Congress on December 21, 2020 are changes pertaining to Flexible Spending Accounts (FSA) and Dependent Care Accounts (DCA). The package is expected to be signed into law by President Trump.

We have outlined notable changes below for your review, which include but are not limited to the following:

  • Permitting FSAs and DCAs to carry over all unused amounts from 2020 to 2021 and from 2021 to 2022.
  • Permitting a 12-month grace period for unused benefits or contributions in health and dependent care FSAs for plan years ending in 2020 or 2021.
  • Permitting FSA participants who terminated either during the 2020 or 2021 plan year to spend down their unused balances for expenses incurred through the end of the plan year in which the termination occurred.
  • An extension of the maximum age of eligible dependents from age 13 to age 14 for dependent care FSAs for the 2020 plan year and for unused amounts from the 2020 plan year carried over into the 2021 plan year.
  • Permitting a prospective change in election amounts for health and dependent care FSAs for plan years ending in 2021 without a corresponding change in status event.

These changes are not mandatory, but grant employers the option to implement these changes if needed. Should an employer decide to implement one or more of these changes, the plan must be amended no later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. For example, if you implement changes for 2021, the plan must be amended by December 31, 2022.

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Trust the Creative Benefits team to keep you updated on ongoing change! Should you have questions surrounding this information, please contact Creative Benefits, Inc. at 866-306-0200 or solutions@creativebenefitsinc.com.