Employers may provide FSA relief through new COVID bill

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act 2021. The bill includes several provisions to provide relief for health care and dependent care flexible spending accounts (FSAs), which may impact employers and their benefit plans.

Under these provisions, employers are allowed, but not required, to amend their Cafeteria Plans. Amendments must be made by the last day of the calendar year following the plan year in which the amendment is effective. For example, calendar year 2020 plan amendments must be adopted on or before December 31, 2021. The following is permitted:

  • Carryover extension (HCFSA/DCFSA): Unused funds from plan years ending in 2020 and 2021 may be carried over into the next plan year.
  • Grace period extension (HCFSA/DCFSA): For plan years ending in 2020 or 2021, the grace period may be extended up to 12 months after the end of plan year.
  • Election amount changes (HCFSA/DCFSA): Plans ending in 2021 may allow election amount changes for any reason.
  • Terminated participants (HCFSA): Allow participants who cease participation in a 2020 or 2021 plan the opportunity to receive reimbursements from unused contributions through the end of the plan year in which the participation ceased (including any applicable grace period).
  • Maximum age increased (DCFSA): For a plan year that had an election period ending on or before January 31, 2020, participants may claim expenses for dependents who turned 13 during the applicable plan year and any extension to that plan year.

These provisions are options for employers to consider. Should you elect to amend your plan, please contact your Relationship Manager or Optum Bank client services.