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 yea
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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. Simila
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In late December, President Trump signed The Consolidated Appropriations Act (CAA) into law. The law makes temporary changes to the rules governing health flexible spending accounts (Health FSAs) and dependent care flexible spending accounts (Dependent Care FSAs). These changes were made to assist employees affected by the COVID-19 pandemic who were unable to utilize amounts they contributed to their FSAs. Employers should note that these changes are voluntary and to the extent implemented, will eventually require plan amendments.
Health FSA changes
Carryovers of Unused Benefits: An employer may permit Health FSA participants to carry over any unused benefits or contributions remaining in their Health FSAs from plan years ending in 2020 (which for a calendar year plan would simply mean the 2020 plan year) to the plan year ending in 2021(the 2021 plan year for a calendar year plan). In addition, amounts remaining at the
Q: Does the Consolidated Appropriations Act, 2021 (CAA) make any changes to
health flexible spending arrangements (Health FSAs)?
A: Yes, if an employer sponsoring a Health FSA chooses to implement changes permitted by the CAA.
There are several
Health FSA-related options under the CAA for employers to consider:
Carryovers: For plan years ending in 2020, an employer may permit Health FSA participants to carry over any unused benefits or contributions remaining in their Health FSAs to the plan year ending in 2021. Similarly, unused amounts from a plan year ending in 2021 may be carried over into the plan year ending in 2022. The ability to carry over any unused benefits or contributions is more generous than the previous $550 carryover limitation.