On February 18, 2021, the IRS issued
Notice 2021-15, clarifying temporary special rules for cafeteria plans, health flexible spending accounts (FSAs) and dependent care assistance programs (DCAPs) that were included in the Consolidated Appropriations Act (CAA) enacted on December 27, 2020. The notice also adds temporary opportunities to make changes in health plan coverage under a cafeteria plan. The notice provides lots of flexibility to employers wishing to implement these special rules.
Flexibility for Carryovers and Grace Periods
The CAA allows plans that include health flexible spending arrangements or dependent care assistance programs to carry over all unused contributions from 2020 and 2021 to the immediately following plan year. Without the CAA relief, the carryover amount is limited to $550 for health FSA amounts unused in 2020; carryovers are not normally permitted for DCAPs. Similarly, plans may extend the claims period up to 12 months after the end of the plan year for unused contributions remaining in a heath FSA or DCAP at the end of the 2020 and 2021 plan year. Without the CAA relief, the post-plan year period for incurring claims (the "grace period") is limited to two months and 15 days.